1. Make some modification to a file and don't save it.  
2. Do M-x diff-buffer-with-file RET. 
3. Pick a modified line and press M-RET. 
4. Now the user is prompted for a file. 
5. Pressing RET "blindly" here doesn't do anything useful. Instead the
   user is prompted with a bunch of completions. Also there is this
   "#<buffer " that is offered which sticks out like sore thumb.

My question is when the "parent" buffer (from which the diff was
produced) why do I need to go through steps 4 and 5 above? Btw, steps 4
and 5 are very fuzzy and have to be made user-friendly.

I am attaching a screen shot at step 4 above.