Well, because something runs within Core, from the Core command line, that doesn't mean it will run by itself on the system command line. Even though vsdiff.exe appears to run by itself, it is actually starting a hidden version of SlickEdit so that it will work...because vsdiff uses SlickEdit editor controls, and uses SlickC.
Core doesn't have the ability to run a hidden version of SlickEdit since there is no vs.exe available. In order to change this I think we'd have to launch a hidden (headless) version of Eclipse, and go from there.
- Ryan