In the diff found here, it could be seen that I have only removed 3 items of the 4 item list. The corresponding visual diff shows that I've removed every item of the list and added a new item although there's no difference between the corresponding item that has been removed and the one that has been added.
Also, the items inside <code> tags aren't being affected by the red/green background. I'm not sure if it's okay, just noted it.
It is a known limitation (see subject page).
As far as the background color of certain tags is concerned, that seems completely natural and a reasonable distinguishing mark.
Seems the limitations include "complex changes to lists. Anyways, this doesn't some pretty complex to me. I just keep an item in the middle and remove everything else. Further, there doesn't seem to be a specific task for lists.
Complexity is a matter of perspective, 2 + 2 is complex to an average child but may not be to gifted children. In any case, that's the default fallback whenever it can't easily determine the specific changes. It happens to lists, tables, galleries, and even "simple" text.
The wikitext diff tool does the same thing with significant chunks of data. It simply gives up for performance reasons despite being a server side solution. This is currently a client side solution (and may eventually move server-side).
Interestingly, gnudiff handles this elegantly:
https://services.w3.org/htmldiff?doc1=https%3A%2F%2Fmeta.wikimedia.org%2Fw%2Findex.php%3Ftitle%3DUser%3AKaartic%2Fsandbox%26oldid%3D17646956%26action%3Drender&doc2=https%3A%2F%2Fmeta.wikimedia.org%2Fw%2Findex.php%3Ftitle%3DUser%3AKaartic%2Fsandbox%26oldid%3D17646958%26action%3Drender
