Line Mode Merge (Merge menu)
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This command switches the merge function from block merge to selected line merge.  By default the block mode merge is active.  In this mode you can only use the toolbar icons Go to Next Difference and Go to Previous Difference and merge the current block with Merge First to Second, Merge Second to First, etc.

If you want to select individual lines in differenced blocks for merging, you must enable the
Line Mode Merge option in the Merge menu or select the Save Merge Changes (disk) icon in the toolbar.

Once this is done, you may select the lines by clicking with the left mouse button at a line and using Shift and Ctrl to select a range of lines (Shift) or select/unselect individual lines (Ctrl).

After you have selected the lines in first OR second file, select with a single left mouse button click the line in the other file (side), where the selected lines should be inserted before or after this line.

With this method you can select (for example) in file 1 (left side) the lines 8-20, 25 and 30 and insert these lines in file 2 (right side) before or after line 50.

You cannot replace a line in the other file with the selected lines.  Simply select after inserting the lines you don't need anymore and press the DEL key to delete the selected lines.