I have seen where Beyond Compare can work around some of the line/source diffing that diffzilla doesn't easily handle.
For example. If I take a function within a file and move it to the end of the file and then make one line change (e.g., add a character) within that moved function.
With Beyond Compare, you can open the old file and the new file, tell it to realign a starting block (F7) with a different location in the other file (click where to start realignment) so that the two (old/new) locations of the function line up and then I can see my single change of the function, even though it moved several lines/functions away from its original location. I have yet to figure out how to make these realignments on the fly within diffzilla.
When diff'ing XML (particularly XML that applications reorder all the time), this is very useful.
Interesting. There are some workarounds.
If you move a function, you could do a symbol diff. A resync would be nice since it has the advantage of handling more than just the one function symbol.
There are some non-diffzilla compare commands which can come in handy. I almost always use them when I need to compare two parts of the same file (yep you heard right). The commands are "compare" and "compare-options". No where near the power of DIFFzilla but these are very useful. the "compare-options" command displays some simple but useful compare options.
To use the "compare" command, close all edit windows, open the first file, do a split window, and open a second file (unless comparing parts of the same file). Put the cursor location where you want to start the compare in both windows. Now invoke the "compare" command. I think it's bound to F6. There is a "resync" command but I haven't used it and don't remember what it does (maybe finds lines which match). Whatever it does it's very primitive. After the mismatch, just adjust the cursors in each window and do another compare.
This will work for your XML example and will also work when you want to compare to parts in the same source file (that's what I use it for).