I don't like ms diff that integrated into Visual Studio 2008 TFS Edition. Is it possible to change this file comparer to external one (Beyond Compare, for example)?
Here are the steps from that link that are specific to Beyond Compare and TFS:
3-way Merge (v3 Pro)
2-way Merge (v3 Std, v2)
Use the same steps as the 3-way merge above, but use the command line: %1 %2 /savetarget=%4 /title1=%6 /title2=%7
Search is your friend :-)