Reland r374389: [lit] Clean up internal diff's encoding handling

To avoid breaking some tests, D66574, D68664, D67643, and D68668
landed together.  However, D68664 introduced an issue now addressed by
D68839, with which these are now all relanding.

Differential Revision: https://reviews.llvm.org/D68664

llvm-svn: 374649