What is the target application type? Web/Winform?
I don't see how using a web browser would be a problem. You simply need to make sure you HtmlEncode all the text before putting it to the browser.
Are you doing this to learn it or because you need a diff viewer? There are many programs out there already that have very good diff algorithms. I would be surprised if you couldn't find a .NET user control for this.
-Peter
compiledthoughts.com