diff --git a/CHANGES b/CHANGES
new file mode 100644
--- /dev/null
+++ b/CHANGES
@@ -0,0 +1,33 @@
+Version 0.2 released 08 Feb 2009
+
+* Changed diff to do a line-by-line rather than word-by-word diff.
+  The word-by-word diff led to excessive memory usage and confusing
+  output in some cases.  NOTE:  diff now returns lists of lines,
+  not including newlines.  So calling programs may need to be changed.
+
+  diff also now skips calling getGroupedDiff when the left document
+  is empty, for better performance.
+
+* Added ghc-prof-options to cabal file.
+
+* Clean up code in gitRetrieve.
+
+* Added ensureFileExists to Darcs module. Added checks to ensure that file
+  exists in darcsLatestRevId and darcsRetrieve.  If not, return
+  NotFound.
+
+* gitRetrieve:  check to make sure object is a file before retrieving.
+  Also, if Nothing is the revision ID, use gitLatestRevId rather than
+  going directly to the file system. This is a step in the direction of
+  making filestore compatible with bare repositories.
+
+* Test suite has been wired into Setup.lhs:  'cabal test' now runs tests.
+
+* Added new test case for attempting to retrieve a subdirectory,
+  and for creating a second file in a subdirectory.
+
+* Minor code cleanup.
+
+Version 0.1 released 24 Jan 2009
+
+* Initial release.
diff --git a/Data/FileStore.hs b/Data/FileStore.hs
--- a/Data/FileStore.hs
+++ b/Data/FileStore.hs
@@ -1,7 +1,7 @@
 {-# LANGUAGE Rank2Types, FlexibleContexts #-}
 {- |
    Module      : Data.FileStore
-   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Brandwen, Sebastiaan Visser
+   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Branwen, Sebastiaan Visser
    License     : BSD 3
 
    Maintainer  : John MacFarlane <jgm@berkeley.edu>
diff --git a/Data/FileStore/Darcs.hs b/Data/FileStore/Darcs.hs
--- a/Data/FileStore/Darcs.hs
+++ b/Data/FileStore/Darcs.hs
@@ -1,6 +1,6 @@
 {- |
    Module      : Data.FileStore.Darcs
-   Copyright   : Copyright (C) 2009 Gwern Brandwen
+   Copyright   : Copyright (C) 2009 Gwern Branwen
    License     : BSD 3
 
    Maintainer  : John MacFarlane <jgm@berkeley.edu>
@@ -25,13 +25,12 @@
 import Data.List (intersect, nub)
 import Data.Maybe (fromMaybe, fromJust)
 import Data.Time.Clock.POSIX (posixSecondsToUTCTime)
-import System.Directory (doesDirectoryExist, createDirectoryIfMissing)
+import System.Directory (doesFileExist, doesDirectoryExist, createDirectoryIfMissing)
 import System.Exit (ExitCode(ExitSuccess))
 import System.FilePath ((</>), takeDirectory, dropFileName)
-import System.IO.Error (isDoesNotExistError)
 import Text.Regex.Posix ((=~))
 import Text.XML.Light
-import qualified Data.ByteString.Lazy as B (ByteString, readFile, writeFile)
+import qualified Data.ByteString.Lazy as B (ByteString, writeFile)
 
 -- | Return a filestore implemented using the Darcs distributed revision control system
 -- (<http://darcs.net/>).
@@ -138,6 +137,12 @@
                                         os ++ [p, f]
                          return $ lines $ toString r
 
+-- | If name doesn't exist in repo or is not a file, throw NotFound
+ensureFileExists :: FilePath -> ResourceName -> IO ()
+ensureFileExists repo name = do
+  isFile <- doesFileExist (repo </> encodeString name)
+  when (not isFile) $ throwIO NotFound
+
 ---------------------------
 -- End utility functions and types
 -- Begin repository creation & modification
@@ -236,6 +241,7 @@
 -- | Return revision ID for latest commit for a resource.
 darcsLatestRevId :: FilePath -> ResourceName -> IO RevisionId
 darcsLatestRevId repo name = do
+  ensureFileExists repo name
   -- changes always succeeds, so no need to check error
   (_, _, output) <- runDarcsCommand repo "changes" ["--xml-output", "--summary", name]
   let patchs = parseDarcsXML $ toString output
@@ -243,23 +249,21 @@
       Nothing -> throwIO NotFound
       Just as -> if null as then throwIO NotFound else return $ revId $ head as
 
--- | Retrieve the (text) contents of a resource.
+-- | Retrieve the contents of a resource.
 darcsRetrieve :: Contents a
             => FilePath
             -> ResourceName
             -> Maybe RevisionId    -- ^ @Just@ revision ID, or @Nothing@ for latest
             -> IO a
--- If called with Nothing, go straight to the file system
-darcsRetrieve repo name Nothing = do
-  let filename = repo </> encodeString name
-  catch (liftM fromByteString $ B.readFile filename) $
-    \e -> if isDoesNotExistError e then throwIO NotFound else throwIO e
+darcsRetrieve repo name Nothing =
+  darcsLatestRevId repo name >>= darcsRetrieve repo name . Just
 darcsRetrieve repo name (Just revid) = do
-   let opts = ["contents", "--match=hash " ++ revid, name]
-   (status, err, output) <- runDarcsCommand repo "query" opts
-   if status == ExitSuccess
-      then return $ fromByteString output
-      else throwIO $ UnknownError $ "Error in darcs query contents:\n" ++ err
+  ensureFileExists repo name
+  let opts = ["contents", "--match=hash " ++ revid, name]
+  (status, err, output) <- runDarcsCommand repo "query" opts
+  if status == ExitSuccess
+     then return $ fromByteString output
+     else throwIO $ UnknownError $ "Error in darcs query contents:\n" ++ err
 
 -- | Get a list of all known files inside and managed by a repository.
 darcsIndex :: FilePath ->IO [ResourceName]
diff --git a/Data/FileStore/Generic.hs b/Data/FileStore/Generic.hs
--- a/Data/FileStore/Generic.hs
+++ b/Data/FileStore/Generic.hs
@@ -1,6 +1,6 @@
 {- |
    Module      : Data.FileStore.Generic
-   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Brandwen, Sebastiaan Visser
+   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Branwen, Sebastiaan Visser
    License     : BSD 3
 
    Maintainer  : John MacFarlane <jgm@berkeley.edu>
@@ -24,10 +24,7 @@
 
 import Control.Exception (throwIO, catch, SomeException, try)
 import Data.FileStore.Utils
-import Data.Maybe (isNothing)
 import Data.List (isInfixOf)
-import qualified Data.List.Split as S (whenElt, split)
-import Data.Char (isSpace)
 import Data.Algorithm.Diff (DI(..), getGroupedDiff)
 import Prelude hiding (catch)
 
@@ -72,25 +69,23 @@
                                   handleUnknownError
        return $ Left (MergeInfo latestRev conflicts mergedText)
 
--- | Split a string at spaces (but include the spaces in the list of results).
-splitOnSpaces :: String -> [String]
-splitOnSpaces = S.split (S.whenElt isSpace) 
-
--- | Return a unified diff of two revisions of a named resource, using an external @diff@
--- program.
+-- | Return a unified diff of two revisions of a named resource.
+-- Format of the diff is a list @[(DI, [String])]@, where
+-- @DI@ is @F@ (in first document only), @S@ (in second only),
+-- or @B@ (in both), and the list is a list of lines (without
+-- newlines at the end).
 diff :: FileStore
      -> ResourceName      -- ^ Resource name to get diff for.
      -> Maybe RevisionId  -- ^ @Just@ old revision ID, or @Nothing@ for empty.
      -> Maybe RevisionId  -- ^ @Just@ oew revision ID, or @Nothing@ for latest.
      -> IO [(DI, [String])]
+diff fs name Nothing id2 = do
+  contents2 <- retrieve fs name id2
+  return [(S, lines contents2)]   -- no need to run getGroupedDiff here - diff vs empty document 
 diff fs name id1 id2 = do
-  contents1 <- if isNothing id1
-                  then return ""
-                  else retrieve fs name id1
+  contents1 <- retrieve fs name id1
   contents2 <- retrieve fs name id2
-  let words1 = splitOnSpaces contents1
-  let words2 = splitOnSpaces contents2
-  return $ getGroupedDiff words1 words2
+  return $ getGroupedDiff (lines contents1) (lines contents2)
 
 -- | Return a list of all revisions that are saved with the given
 -- description or with a part of this description.
diff --git a/Data/FileStore/Git.hs b/Data/FileStore/Git.hs
--- a/Data/FileStore/Git.hs
+++ b/Data/FileStore/Git.hs
@@ -18,7 +18,6 @@
 where
 import Data.FileStore.Types
 import System.Exit
-import System.IO.Error (isDoesNotExistError)
 import Data.Time.Clock.POSIX (posixSecondsToUTCTime)
 import Data.FileStore.Utils (hashsMatch, isInsideRepo, runShellCommand, escapeRegexSpecialChars) 
 import Data.ByteString.Lazy.UTF8 (toString)
@@ -112,16 +111,17 @@
             -> ResourceName
             -> Maybe RevisionId    -- ^ @Just@ revision ID, or @Nothing@ for latest
             -> IO a
-gitRetrieve repo name Nothing = do
-  -- If called with Nothing, go straight to the file system
-  let filename = repo </> encodeString name
-  catch (liftM fromByteString $ B.readFile filename) $
-    \e -> if isDoesNotExistError e then throwIO NotFound else throwIO e
-gitRetrieve repo name (Just revid) = do
-  (status, err, output) <- runGitCommand repo "cat-file" ["-p", revid ++ ":" ++ name]
-  if status == ExitSuccess
-     then return $ fromByteString output
-     else throwIO $ UnknownError $ "Error in git cat-file:\n" ++ err
+gitRetrieve repo name revid = do
+  let objectName = case revid of
+                        Nothing  -> "HEAD:" ++ name
+                        Just rev -> rev ++ ":" ++ name
+  -- Check that the object is a file (blob), not a directory (tree)
+  (_, _, output) <- runGitCommand repo "cat-file" ["-t", objectName]
+  when (take 4 (toString output) /= "blob") $ throwIO NotFound
+  (status', err', output') <- runGitCommand repo "cat-file" ["-p", objectName]
+  if status' == ExitSuccess
+     then return $ fromByteString output'
+     else throwIO $ UnknownError $ "Error in git cat-file:\n" ++ err'
 
 -- | Delete a resource from the repository.
 gitDelete :: FilePath -> ResourceName -> Author -> Description -> IO ()
diff --git a/Data/FileStore/Utils.hs b/Data/FileStore/Utils.hs
--- a/Data/FileStore/Utils.hs
+++ b/Data/FileStore/Utils.hs
@@ -1,6 +1,6 @@
 {- |
    Module      : Data.FileStore.Utils
-   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Brandwen
+   Copyright   : Copyright (C) 2009 John MacFarlane, Gwern Branwen
    License     : BSD 3
 
    Maintainer  : John MacFarlane <jgm@berkeley.edu>
diff --git a/Setup.lhs b/Setup.lhs
--- a/Setup.lhs
+++ b/Setup.lhs
@@ -1,3 +1,11 @@
 #!/usr/bin/env runhaskell
 > import Distribution.Simple
-> main = defaultMain
+> import System.Process
+> import System.Exit
+
+> main = defaultMainWithHooks $ simpleUserHooks { runTests  = runTestSuite }
+
+Run test suite.
+
+> runTestSuite _ _ _ _ = runCommand "runghc -idist/build/autogen Tests.lhs" >>= waitForProcess >>= exitWith
+
diff --git a/Tests.lhs b/Tests.lhs
--- a/Tests.lhs
+++ b/Tests.lhs
@@ -3,7 +3,7 @@
 This program runs tests for the filestore modules.
 Invoke it with:
 
-    runghc Tests.lhs
+    runghc -idist/build/autogen Tests.lhs
 
 > import Data.FileStore
 > import Test.HUnit
@@ -36,6 +36,7 @@
 >     , ("retrieve resource", retrieveTest1)
 >     , ("retrieve resource in a subdirectory", retrieveTest2)
 >     , ("retrieve resource with non-ascii name", retrieveTest3)
+>     , ("retrieve subdirectory (should raise error)", retrieveTest4)
 >     , ("modify resource", modifyTest)
 >     , ("delete resource", deleteTest)
 >     , ("rename resource", renameTest)
@@ -83,6 +84,7 @@
 >   create fs subdirTestTitle testAuthor "description of change" testContents
 >   revid <- latest fs testTitle
 >   assertBool "revision returns a revision after create" (not (null revid))
+>   create fs "subdir/Subdir title2.txt" testAuthor "+Second file" testContents
 
 *** Create a resource with a non-ascii title, and check to see that revision returns a revision for it:
 
@@ -118,6 +120,13 @@
 >   cont <- retrieve fs nonasciiTestTitle Nothing
 >   assertEqual "contents returned by retrieve" testContents cont 
 
+*** Retrieve a directory (should fail):
+
+> retrieveTest4 fs = TestCase $ do
+>   catch ((retrieve fs "subdir" Nothing :: IO String) >>
+>          assertFailure "did not return error from retrieve from subdir") $
+>      \e -> assertEqual "error from retrieve from subdir" NotFound e
+
 *** Modify a resource:
 
 > modifyTest fs = TestCase $ do
@@ -230,14 +239,14 @@
 
 >   [secondrev, firstrev] <- history fs [diffTitle] (TimeRange Nothing Nothing)
 >   diff' <- diff fs diffTitle (Just $ revId firstrev) (Just $ revId secondrev)
->   let subtracted' = mapMaybe (\(d,s) -> if d == F then Just (concat s) else Nothing) diff'
->   assertEqual "subtracted lines" [last (lines testContents)] subtracted'
+>   let subtracted' = mapMaybe (\(d,s) -> if d == F then Just s else Nothing) diff'
+>   assertEqual "subtracted lines" [[last (lines testContents)]] subtracted'
 
     Diff from Nothing should be diff from empty document.
 
 >   diff'' <- diff fs diffTitle Nothing (Just $ revId firstrev)
->   let added'' = mapMaybe (\(d,s) -> if d == S then Just (concat s) else Nothing) diff''
->   assertEqual "added lines from empty document to first revision" [testContents] added''
+>   let added'' = mapMaybe (\(d,s) -> if d == S then Just s else Nothing) diff''
+>   assertEqual "added lines from empty document to first revision" [lines testContents] added''
 
     Diff to Nothing should be diff to latest.
 
diff --git a/filestore.cabal b/filestore.cabal
--- a/filestore.cabal
+++ b/filestore.cabal
@@ -1,7 +1,7 @@
 Name:                filestore
-Version:             0.1
+Version:             0.2
 Cabal-version:       >= 1.2
-Build-type:          Simple
+Build-type:          Custom
 Tested-with:         GHC==6.10.1
 Synopsis:            Interface for versioning file stores.
 Description:         The filestore library provides an abstract interface for a versioning
@@ -21,5 +21,6 @@
                      -- Data.FileStore.Sqlite3,
                      Data.FileStore.Utils, Data.FileStore.Generic
 Other-modules:       Paths_filestore
-Data-Files:          extra/post-update
+Data-Files:          extra/post-update, CHANGES
 Ghc-Options:         -Wall
+Ghc-Prof-Options:    -auto-all