Heya all!
I posted a solution to the diff problem in the ni.com discussion forum. you can find it here:
http://forums.ni.com/t5/LabVIEW/LabVIEW-with-Git/td-p/1047455/page/3
Merging seems to work fine with me, just by following the google doc that Ton Plomp suggested.
Hope you find it useful