The file has mac classic line endings mixed with occasional Unix / DOS line endings .
It makes the output from Mercurial painful to read.
The trick is that a \r isn't a line ending as far as the difference source is concerned, just another character of the line. But the rendering systems all treat it as a line break.
Unfortunately, colorization happens after the line breaking and is thus all wrong.
I sent a "fixed" file to chaals, but the right fix involves rewriting the repository and null merging over what's there.
Sent from my BlackBerry 10 smartphone.