How to quickly setup the best free Diff/Merge tool with VS 2010
First go get the tool. It's free and it rocks.
Next, save this XML to a file with a .vssettings extension:
<UserSettings>
<ApplicationIdentity version="10.0"/>
<Category name="Source Control_TeamFoundation" Category="{2A718788-A6D9-44C5-90EF-438BF5B06A74}" Package="{4CA58AB2-18FA-4F8D-95D4-32DDF27D184C}" RegisteredName="Source Control_TeamFoundation" PackageName="Microsoft.VisualStudio.TeamFoundation.VersionControl.HatPackage, Microsoft.VisualStudio.TeamFoundation.VersionControl, Version=10.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a">
<PropertyValue name="UserTool1" extension=".*" operation="Compare" command="C:\Program Files (x86)\SourceGear\DiffMerge\DiffMerge.exe" arguments="/title1=%6 /title2=%7 %1 %2"/>
<PropertyValue name="UserTool2" extension=".*" operation="Merge" command="C:\Program Files (x86)\SourceGear\DiffMerge\DiffMerge.exe" arguments="/title1=%6 /title2=%8 /title3=%7 /result=%4 %1 %3 %2"/>
</Category>
</UserSettings>
...