From the screenshot, it looks like this is an issue only with empty lines, so adding a space before the word joiner on empty lines seems like a fairly reasonable fix to me.

Doesn't happen only on empty lines. In my installation this shows also on some other lines -- specifically the first few lines of each file, up to the first opening brace (this definition is not rigorously tested).

EDIT: a more reasonable definition is "all lines that don't start with an indent" (duh).

Until we figure out exactly how to move forward on this without creating new problems, you could do this locally as a workaround:

$zero_space = "";

That will break copy-paste out of Differential (you'll get all the text you selected, instead of just the right hand side of the diff), but fix all the UI glitches.