In my attempts to get you example files that are not company confidential, I discovered some additional information. The multifile diff that I was doing is: one is on my "C:" drive (Windows10), and the other is on a network drive mapped to "U:" the network drive is \\wsl$\Ubuntu (a Linux virtual machine on the same Windows machine.
Using "File Explorer" I copied the two files to a directory tree on my C: drive, to make it easy to put in one zip file. However, when I run diffZilla on the two directories in this tree, I do not see the issue. Therefore, I don't think the issue is related to the files, but is related to using a mapped network drive. Attached is the zipped directory tree anyway.
I just did a diff of a local directory and a mapped network drive that is on a different windows computer. Also, a diff with a mapped network drive with a native Linux machine. Both of this diffs did not show the issue, so the issue only seems to be related to the virtual machine.