I have already mentioned that I have been heavily using the service factory modelling edition in recent projects; very recently I got massive conflict with an SVN update to one particular service!
The servicecontract itself took an awful lot of fixing with a lot of messing around in DiffMerge to make sure all the changes from both sets of changes were correctly merged - it's not easy to merge but reading the operations and relating back is honkingly fiddly but not impossible. Then it came to the supporting diagram XML - this was a real mess; it really only took me one look before I had to think of something else. After thinking through the hassle of rolling back my changes, then applying to the updated contract - I realised I wanted to avoid this hassle. I thought I would get into the old school "just try it and see" mode - I canned the inner XML from the diagram file, sweetly if you leave the root element and delete all content, once you open the service contract diagram it re-adds all the required elements. So its just a case of laying out again - significantly less hassle than the other option. So I was chuffed that I saved time.
By the way this worked with the data contract that was also massively conflicted.