I think I have this working at a serviceable level if not optimal.
in visual studio go to tools > options > source control > plug-in settings
click the "advanced" button
in the sourcesafe options dialog, switch to the "custom editors" tab
for operation, select file difference
for file extension enter .*
for command line enter
"C:\Program Files\WinMerge\WinMergeU.exe" /x /e /ub /wl /dl %6 /dr %7 %1 %2
click the "add" button then the "ok" button.
using "compare" from a file's context menu or viewing history and selecting "diff" should bring up winmerge with the file comparison. the original is on the left and the modified file is on the right (is that the right placement? should they be swapped?). if you selected a highlighted difference, you can actually sync that area at this time as well. visual studio will just recognize the file has changed and ask you to reload. I haven't gotten to the situation where I'm in an actual "merge" situation so I'm not sure what happens there. I'll update this post if I ever have more info to add.
I'm using VS2008, sourcesafe 2005, and winmerge 2.12.4 installed to the default directory. I copied the settings from this post: http://weblogs.asp.net/garrypilkington/archive/2009/12/16/winmerge-as-a-comparison-tool-in-visual-studio-2008.aspx