I wrote and released a Windows application that specifically solves the problem of comparing and merging XML files.
Project: Merge can perform two and three way comparisons and merges of any XML file (where two of the files are considered to be independent revisions of a common base file). You can instruct it to identify elements within the input files by attribute values, or the content of child elements, among other things.
It is fully controllable via the command line and can also generate text reports containing the differences between the files.