adding git tooling for a specific file type seems like a slippery slope, no? (assuming you are saying that git itself should have this tooling built in - if you mean some sort of addon, fair enough but then everyone who uses jupyter & git needs to install that addon)

I am not suggesting that git itself should ship with a bunch of custom merge utilities for specific file types. git ships with a mechanism that allows custom merge drivers. Setting up custom merge drivers might not be ergonomic right now, but it could have some benefits compared to the transformation approach. For example merge conflicts could result in a valid notebook and it could be manually resolved inside the notebook interface, no need to dive into the text file.