Currently, arc diff detects Git LFS with git ls-files -z -- ':(attr:filter=lfs)' magic. This is an accurate test, but does not work on older Git.
Try a simpler, dumber test and see if that will work. If this also has issues, we can try this stuff:
- do version detection;
- pipe the whole tree to git check-attr;
- try a command like git lfs ls-files instead, which is probably a wrapper on one of these other commands.