In another post I found the very neat
git diff --color-words='[^[:space:]]|([[:alnum:]]|UTF_8_GUARD)+'
which does a great job at compressing git-diff's output to the essential while remaining legible (especially when adding --word-diff=plain for additional [-/-] and {+/+} surrounding deletions/additions). While this does include whitespace changes, the output does not highlight them in any noticeable way, e.g. when changing the indentation of a line of python code (which is a severe change) will show up as that line with the longer indentation (before or after), but there is no highlighting whatsoever.
How can whitespace changes be hightlighted correctly, maybe by replacing whitespace by some unicode characters such as ·, ⇥ and ↵, or something more close to git diff --word-diff-regex=.'s {+ +} etc but with the smarter word separation?
Here's an alternative using the substitution suggested at the question's end:
git config --global core.pager 'less --raw-control-chars'
such that unicode symbols are displayed correctly instead of some weird <c3>ish output. Add the following to your git configuration:
[diff "txt"]
textconv = unwhite.sh
and, lacking a global solution, to .gitattributes something like
*.py diff=txt
Finally, unwhite.sh:
#!/bin/bash
awk 1 ORS='[7m\\n[27m\n' $1 | sed -e 's/ /␣/g' -e 's/\t/→/g'
Be advised there are raw escape (awk fails to support \e) characters before the [s, I display the newline-indicating \n in inverted colors to differ them from literal \ns. This may fail to copy paste, in which case you may have to manually insert them. Or try your luck with a unicode symbol such as ↵ instead.
I deviated from the original unicode symbols since they failed to display correctly on msysgit.