The diff utility available on the Check-In dialog in Visual Studio Team Edition (Compare option on the context menu) is very basic. I'd love to see this support editing of the file(s). Well, files that can be edited. I'm not sure if this diff utility can be applied to 2 files not in a version control repository, but if so, both should be editable. If not, obviously, only the local version would be.
For those questioning the usefulness of 2 local file comparisons, you obviously haven't been working in the configuration management (CM) world for very long. This can be crucial; especially, if you're managing the repository.