We have two issues with our source control software when dealing with LLBLGen:
The LGP file is binary
It would be much easier if the project file was ascii and not binary. Because now it is impossible to perform a merge when two people want to work on the same project file. We now have (literally) placed an "LLBLGen token" (which is a small cardboard box) on our tables. And only the one who has the token is allowed to change and commit the project file. (Before that we lost quite a few hours of development time when one person forgot to commit the file while the other started working on a older version from the source control system. The differences could not be merged.)
Both the original and the backup project files end with .lgp
It would be better if backup project files had a different extension (like .lgp.bak) because then it would be much easier to exclude the backup files from being stored in the source control system.
For the second request:
I think this can be handled by most of the source control applications.
For example, in MS Source Safe backup files won't be added to source control unless you wanted too.
v2's lgp file contains version tokens per object. We've planned to create a merge application later this year which merges different .lgp files. As this can be very complex we hope this will work out. See Walaa's post for the link to the explanation why we didn't use XML