Forcing vimdiff to wrap lines?

You can put the following in your vimrc.

au VimEnter * if &diff | execute 'windo set wrap' | endif

I use the following:

autocmd FilterWritePre * if &diff | setlocal wrap< | endif

FilterWritePre is triggered immediately before a generated diff is written to the buffer, and setlocal wrap< copies the global value of wrap. Of course it's also possible to simply force setlocal wrap.