Wordpress is less than ideal for managing via git, primarily due to their plugin architecture. The best way I have managed to use git is to put the repo at the wp-content level and only watch the theme and plugin directories. Then anytime I make updates to a plugin or group of plugins, I make sure to commit those changes as a seperate commit to what I am normally working on. It is tedious and hacky, but it at least gets me basic version control functionality with the ability to roll back on any code that can effect theme functionality.