Just 7 hours ago to Smerge was added a new command to do exactly that. Now you can use M-x smerge-vc-next-conflict to either jump to the next conflict in focused buffer or to the next conflicted file in the repository that the file belongs to.
Don't forget to use (require 'smerge-mode) for this function to appear.
For those who can't for some reason upgrade ...
Good idea. Here's a next-conflict function that wraps around whenever there is no more conflicted files, but the current one still has conflicts:
(defun next-conflict ()
(let ((buffer (current-buffer)))
(when (not (smerge-next-safe))
(when (eq buffer (current-buffer))
(let ((prev-pos (point))...
Use C-c c-e in the vc-diff buffer to apply the diff to a file. Enter the target filename and press RET. This will launch ediff and attempt to apply the patch.
For me, the patch applied successfully without any hitches, so I just needed to press n a few times in the ediff frame to review the result, and then q to quit the ediff session.
Then return to the ...
smerge-command-prefix is used by smerge.el when the smerge.el file is loaded. So you need to perform your setq before smerge.el is loaded. My crystal ball tells me that you likely have something in your .emacs which causes smerge to be loaded before that setq.