OS: Windows 7 x64
Kdiff3: 0.9.95-2 (and 0.9.93-3, 0.9.96a) (the latter one is provided with TortoiseHg 2.0.3)
When trying to diff files with a "Unix" Line End Style all lines are combined to one line and thus diffing/merging becomes impossible.
This did work correctly in version 0.9.92 (provided with TortoiseHg 1.1.9), but stopped working in version 0.9.93-3 (didn't test the builds in between, since I couldn't download them)
I tried several settings to try and help kdiff3 to show the files correctly, but nothing worked for me.
(Like setting "Settings/Editor/Line end style" to "Unix" and the restarting kdiff, and setting the correct file encodings ("Settings/Regional Settings/File Encoding for .") for all 3 files)
I provided an example of 3 files that I cannot diff in my installation.