I use this in my ~/.gitconfig

   [diff]
   algorithm = patience

I've experimented with patience diff, but not seen it deliver reliably superior results than myers (the current default).

I saw it deliver superior results enough that I spent a while figuring out how to get vimdiff to use patience.

And? What do I need to do to get that? :)

Oh, just saw this, it involves invoking the proper git tools to get the diff, and then converting the diff format from unified to ed format. The later is actually easier than it might seem as unified diffs start all of their special information in column 0; IIRC I wrote an awk script to do this. It's on my work machine though, so I don't have it handy.

I tried GP's example, and in this particular case both --patience and the default (Myers) work the same, both doing the thing you want them to. Which perplexes me, because I know I've seen the bad case too, but can't seem to find a minimal example of it (I tried a couple variations on the example; they all did the 'right' thing).