The icons at the upper left of the Team Foundation Server merge tool

...are not trivial. Even if TFS does all of the work for you in doing a merge, you can't click "OK" to accept the changes until you press the leftmost icon for "Save." I just spent five minutes trying to uncover this subtle requirement. (To manually copy and paste stuff from the THEIRS and YOURS panes to the lower pane with the final file, use the appropriate icons.)