With Mercurial and Git, when your changes for an image create a conflict, you can resolve this much in the same way you would for text. Kaleidoscope's mergetool capabilities allow you to resolve these conflicts.
Be sure you have set Kaleidoscope as your mergetool via the Integration menu for your source control management system:
Go to Kaleidoscope > Integration...
Use ksdiff integration settings configured for Git or Mercurial to send your merge conflicts to Kaleidoscope
ksdiff
settings