When using the diff bundle, I know there are some minor differences between
two files, but diff will mark the entire documents as the difference, even
though maybe 90%+ of the lines are the same. FileMerge does the same thing.

This typically happens when the two documents have different
line-endings. Could that be your problem?

Thanks, Robin, that was it. Somehow, my line endings got screwed up.
 
I did a "save as" over the original, and it now works.

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Dwayne