It is in inc/MODEL/items/_item_funcs.php, but you don't need to make changes in that file.

function posts_nav_link($sep=' :: ', $prelabel='#', $nxtlabel='#', $page='')

So you can change the seperator, your text for previous, and your text for next using parameters. Like so:

function posts_nav_link(' SPLITTER ', 'PREVIOUS TEXT', 'NEXT TEXT')

You can use the technical docs;
http://doc.b2evolution.net

Or simply just a multiple file text searcher program like dreamweaver or agent ransack. So to find where posts_nav_link is defined you would search for 'function posts_nav_link' inside b2evo.

Or just wait for EdB to give you the answer. ;)