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Last summer, I added DiffMerge to my Toolbox and I haven't used WinDiff since.
DiffMerge can do everything WinDiff can, plus a whole lot more -- like intra-line highlighting, merging, and comparing files using configurable rulesets (although you'll likely never need any more than those that come "out-of-the-box" with DiffMerge).
And since the folks at SourceGear don't mind giving away DiffMerge for free, there's no reason not to use it!
Heck, I even configure Visual Studio to use DiffMerge as my comparison tool instead of the default tool that comes with Team Foundation Server (TFS).
To customize your TFS comparison tool in Visual Studio 2008:
Obviously, you may need to adjust the path to DiffMerge.exe as necessary for your environment.
In the past, I tried other tools like BeyondCompare -- but I preferred the simplicity of WinDiff. Then, a couple of years ago, one of my peers pointed me to an internal tool called "Odd" that would do intra-line highlighting. However, I couldn't get over the fact that this was an internal tool only -- and thus not something I could recommend to customers.
When I stumbled across DiffMerge, I was delighted and I haven't looked back since.
Perhaps Visual Studio 2010 will ship with a vastly improved differencing tool, but in the meantime -- or just in case it doesn't -- DiffMerge is my tool of choice.