OS: Windows Vista Business
KDiff3 Version: 0.9.92
1) start kdiff3
2) choose folder A, choose folder B, enable Merge and choose an output directory
3) click ok and everything is ok
Example
A: c:/temp/test.a
B: c:/temp/test.b
Dest.: c:/temp/test.merged
4) open the open dialog (CTRL + O) to change the output folder (or leave the output folder as it is) and click ok
Now the output folder is not set!
Example
A: c:/temp/test.a
B (Dest): c:/temp/test.b
screenshots of the described behavior