I'm not sure if the SemanticMerge configuration is your issue, but if it is, you can try using these settings. I have it working on my work machine, but these are my personal machine settings, so they might not have been updated yet. These settings are for msysgit on Windows 7 by the way:
[mergetool "sm"]
keepBackup = false
trustExitCode = false
cmd = 'C:/Users/<user>/AppData/Local/PlasticSCM4/semanticmerge/semanticmergetool.exe' -b=\"$BASE\" -d=\"$LOCAL\" -s=\"$REMOTE\" -r=\"$MERGED\" -l=csharp -emt=\"mergetool.exe -b=\"\"@basefile\"\" -bn=\"\"@basesymbolic\"\" -s=\"\"@sourcefile\"\" -sn=\"\"@sourcesymbolic\"\" -d=\"\"@destinationfile\"\" -dn=\"\"@destinationsymbolic\"\" -r=\"\"@output\"\" -t=\"\"@filetype\"\" -i=\"\"@comparationmethod\"\" -e=\"\"@fileencoding\"\"\" -edt=\"mergetool.exe -s=\"\"@sourcefile\"\" -sn=\"\"@sourcesymbolic\"\" -d=\"\"@destinationfile\"\" -dn=\"\"@destinationsymbolic\"\" -t=\"\"@filetype\"\" -i=\"\"@comparationmethod\"\" -e=\"\"@fileencoding\"\"\"