I use Beyond Compare 4 as my External Diff comparison tool.
I selected it from the Dropdown list, but it does not seem to work. Perhaps the dropdown is based on an older version?
I also couldn't use a Custom > Diff Command unless I used c:\progra~1 instead of c:\program files. I tried wrapping c:\program files in double quotes, but that didn't make a difference.
The program location is: C:\Program Files\Beyond Compare 4\BCompare.exe
I had to configure Custom as c:\progra~1\beyond~1\bcompare.exe to make the external diff to work.
Not intuitive.
Couldn't upload and attach image (HTTP error), so I am providing a link from imgur: http://i.imgur.com/XZB46F5.jpg