See PHI1394. Currently, if you run arc diff from a working directory with: more than 255 characters; or (probably) non-UTF8 characters, the operation fails:
{"result":null,"error_code":"ERR-CONDUIT-CORE","error_info":"#1406: Data too long for column 'sourcePath' at row 1"}
The desired path forward here is likely to remove sourcePath and sourceMachine. Previously, see T838.
(These fields do power some arc behavior today so we can't strictly just rip them out, and it's possible that unusual/niche workflows care about them.)