diff -r d768614578dd -r 4fe9ca519637 mercurial/mdiff.py
--- a/mercurial/mdiff.py	Wed Nov 11 17:02:00 2009 +0100
+++ b/mercurial/mdiff.py	Wed Nov 11 18:31:42 2009 +0100
@@ -57,13 +57,13 @@
 
 defaultopts = diffopts()
 
-def wsclean(opts, text):
+def wsclean(opts, text, blank=True):
     if opts.ignorews:
         text = re.sub('[ \t]+', '', text)
     elif opts.ignorewsamount:
         text = re.sub('[ \t]+', ' ', text)
         text = re.sub('[ \t]+\n', '\n', text)
-    if opts.ignoreblanklines:
+    if blank and opts.ignoreblanklines:
         text = re.sub('\n+', '', text)
     return text
 
@@ -183,6 +183,10 @@
     # below finds the spaces between those matching sequences and translates
     # them into diff output.
     #
+    if opts.ignorews or opts.ignorewsamount:
+        t1 = wsclean(opts, t1, False)
+        t2 = wsclean(opts, t2, False)
+
     diff = bdiff.blocks(t1, t2)
     hunk = None
     for i, s1 in enumerate(diff):
@@ -208,7 +212,7 @@
         if not old and not new:
             continue
 
-        if opts.ignorews or opts.ignorewsamount or opts.ignoreblanklines:
+        if opts.ignoreblanklines:
             if wsclean(opts, "".join(old)) == wsclean(opts, "".join(new)):
                 continue