Ugh. I forgot that we have a totally _separate_ "is this binary?" heuristic for CRLF versus diffing. Note that the comment above the function you link to is hilariously out of date (the function in diff is no longer called `mmfile_is_binary`, and I don't think it _ever_ checked printable characters).

There are no plans to change it, but just be aware that what is there is largely "what happened to grow" and not by design.