If you just need a simple file comparison and merge tool, I recommend Beyond Compare by Scooter Software http://www.scootersoftware.com/
It lets you see the differences side by side, and you can edit and merge the files in the same view.
I can do merges in minutes that used to take hours.
It doesn't have any version control features, but if all you need is merging capabilities, this is the best tool I have found.
We are currently using Microsoft Visual Source Safe 6.0 for version control. It has similar file diff features, but I prefer Beyond Compare's interface, and it can be used in conjunction with any version control tool.