After trying numerous graphical merging programs in an attempt to find something better than patch + wiggle and diff3, I know what I would like to have. You can find a detailed description in the attached file. Here is a summary:
Functionality identical to patch + wiggle + editor along with diffuse's isolate, align with selection, and ability to edit the output file.
Automatic application of non-conflicting changes.
Ability to apply mine, yours, and merged merging strategies along with appropriate exit codes suitable for integration with VCS automation.
Shortcuts for completely mouse free operation.
Rapid top-to-bottom merging.
"diff -u BASE OTHER" colouring of BASE and OTHER files so you can see what changes will be applied.
Chunk counter so you know when you are done.
Configurable chunk definition.
Chunk-by-chunk and line-by-line merging.
etc, etc, etc
Detailed description of diffuse -m 3-way merge mode