I've worked it out. You delete either one of the events, then drag the end of the other event to fill the gap (the audio data is still there).
Oh, this Event Tool is apparently a new feature introduced in Sound Forge 10. Up til this morning I was using an old version which is why it's thrown me a bit. Now I'm used to it, it MASSIVELY helps with editing audio, i.e. if you've got a bit of dialog and you want to edit out a word, you can just cut the piece in two, and drag them so they overlap slightly and it automatically cross-fades between the two. And it's not permanent either. You can drag lumps of audio about all day. Certainly come a long way since the old Sonic Foundry days.
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