The File Compare is capable of detecting inner-line changes, and the compared files can be edited.
Of course, the change coloring automatically updates while editing.
The buttons in the center change stripe can be used to transfer entire change blocks from one file to the other.
You can configure the encoding used for reading and writing, whether whitespace or line numbers should be displayed, whether changes in whitespace should be ignored, or how inner-line changes should be detected.
You can also export the colored view as an HTML file.
To support comparison of files from different operating systems, SmartSynchronize allows changing the encodings used for reading and writing the files separately for both files.
SmartSynchronize writes the edited files with the remembered line separators, so it doesn't matter on what platform you edit the compared files.