Size of diff? Speed of diff? etc
That would be helpful in trying to give you alternative sources :)
.., observableValue, -> .., observable[Event, observable]Value,
.., observableValue, -> .., [observableEvent, ]observableValue,
More generally, I'd say that the point of diffing in something like VSCode is to try to aide the reviewer (for any number of types of reviewer - looking at merge conflicts etc) in evaluating a change.
It's a tool for human understanding, and from that point of view, text diffing is kinda barbaric (don't get me wrong, I love it and use it all day long). You can rename a variable using an LSP, knowing that it's effectively a safe no-op on the code. But once it comes to review the PR, that change is just additional noise mixed in with everything else.
I use Neovim, where I have treesitter. I look at the amazing information in there and long for the day when I'll be able to use its power for reviews. Something like I described above - show me a version of the change with stuff that doesn't matter, like renames, removed. Now show me a diff that's the inverse of that, so I can skim it. I mentioned in another comment that `--color-moved=dimmed-zebra` is a useful tool to help focus on what matters.
The referenced issue is only one example. There are many more (e.g. https://github.com/microsoft/vscode/issues/164574).
In case of the merge editor, the diffs should reflect the actual edits as close as possible, so that non-conflicting edits cause non-conflicting diffs, which then allows a non-conflicting merge.