There is something still wrong here with diff.
Open a utf-8 file.
Hex mode.
Diff - compare it to another utf-8 file.
Now the DIFF seems like it turned off hex mode, but the diff isn't right.
Diff shows both files as completely different.
Also, once you close Diff, the file is no longer in hex mode but the encoding is left as binary.
I think because one is in Binary mode now, and the other UTF-8.
But .... Diff didn't prompt to convert encodings like it usually does when two files have different encodings.