For me, smerge-diff-mine-other seems to ignore changes in the number of whitespace characters where there is whitespace, but I would sometimes like it to ignore all whitespace, including newlines - even if a newline was inserted where the was no newline before. How can I achieve that?

C-c C-w in the *vc-diff buffer created by smerge-diff-mine-other doesn't seem to do anything.

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Indeed, all those diff options work line-by-line, and insertion/removal of newlines creates completely different lines so they don't see those changes as "just whitespace".

You need to use a word-based diff or something like that. Emacs comes with one such functionality which is the "refined" highlighting. It's available both in smerge-mode and in diff-mode. IOW, try the smerge-refine or diff-refine-hunk commands, and if you like them you might like to set diff-auto-refine-mode.

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