difflib confusion

[krishnakant Mane]

hello all,
I have a bit of a confusing question.
firstly I wanted a library which can do an svn like diff with two files.
let's say I have file1 and file2 where file2 contains some thing which
file1 does not have.  now if I do readlines() on both the files, I
have a list of all the lines.
I now want to do a diff and find out which word is added or deleted or changed.
and that too on which character, if not at least want to know the word
that has the change.
any ideas please?
kk