Nathan,
If you need third party tool, check my Compare It! from
http://www.grigsoft.com/.
If you want to implement it yourself, search for LCS (Longest Common
Subsequence) realization. It will find difference between 2 strings on
char level. If you need word level only, just hash words, your text
will become set of hashes. Same algorithm will compare results and get
you word differences.
If you will have more questions on topic, feel free to contact me
through site's form.
Regards,
Igor Green
http://www.grigsoft.com
Compare It! + Synchronize It! : Files and folders comparison never was
easier!