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Seems like I have to remind that everybody can still paint their bikeshed in classic colors with "-c" option, but if you all prefer unified colors, why do you resist on painting them in these by default? Custom color options add more to a total price, you know. More customers would be happy if the basic version included their favorite flavor.
From another side unix 'diff' users are smart enough to read command line help for 'diff.py' if they won't like default unified output and choose the option they need. BTW, what option should I specify to unix diff to get HTML or ndiff output?
Let me remind that there are tools like 'svnmerge' that do even more things that standard 'svn merge' does not.
Your arguments could be more convincing if you could show at least one real world example against "diff.py" that outweighs the benefit of having unified diff generated without any additional options. IIUC Python scripts are installed with .py extension even on Unix platform, and you can't execute 'diff.py' instead of 'diff' by mistake.