(g)vimdiff not working (?)

Hello All,
On one of my computers (only one) diff doesn't seem to be working. (This is a 7.3.46 installation on a Windows 7 x64 machine).

Usually, I select two files in Windows Explorer and right-click|"Diff with Vim" and things work as they should. I've also tried launching this from the command line with the same results.

But on one of my computers, the two files open in their respective window (panels(?) in the main window) as expected, but all the code is "folded".

If I expand the folded text, nothing is highlighted, and the tracking doesn't seem to be working.

I looked at the options for the two windows and everything is as expected:
"Cursorbind foldcolumn=2 helplang=En scrollbind
diff foldmethod=diff scroll=11 nowrap "

I use the same _vimrc and _gvimrc file on all my computers and I've tried deleteing the _viminfo file in my home drive.

But still no highlighting. Again, this is happening only on one of my computers. I've even tried installing GnuWin version of Diff, but that didn't help.

Any other suggestions on troubleshooting this?

Thanks!!

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