It should be obvious that the 'Side-by-side' vs 'Inline' toggle impacts every file on the Merge Conflicts page
The 'Side-by-side' vs. 'Inline' option impact all files on the Merge Conflicts page. However, when a file is in 'Edit inline' the toggle between the views has no impact. If you only have the one file on screen, this is confusing, and may feel like something is not responding correctly.
Ideally, the 'side-by-side' and 'inline' options should feel more global to the page, and obvious that when you toggle them, you are impacting every file on the page. Alternatively, it should be clear why nothing happened when the file is in the 'Edit inline' mode.