I am having a similar problem. However the backspace (^H or 0X08) is
not in the file, it's in the commit comments (have no idea how the
user managed that). I can compare file diferences up to the revision
that has the backspace, after that svn thinks the file is binary.
If I use the svn mode in emacs, this problem does not occur.
So, if smart svn would not key off back space in the commit comment
that would be good. Even better would be if there was a way to remove
those back spaces from the comments.
.