diff --git a/app/components/workbench/DiffView.tsx b/app/components/workbench/DiffView.tsx
index 146076c5..7747c4a8 100644
--- a/app/components/workbench/DiffView.tsx
+++ b/app/components/workbench/DiffView.tsx
@@ -542,8 +542,53 @@ const FileInfo = memo(
   },
 );
 
+// Create and manage a single highlighter instance at the module level
+let highlighterInstance: any = null;
+let highlighterPromise: Promise<any> | null = null;
+
+const getSharedHighlighter = async () => {
+  if (highlighterInstance) {
+    return highlighterInstance;
+  }
+
+  if (highlighterPromise) {
+    return highlighterPromise;
+  }
+
+  highlighterPromise = getHighlighter({
+    themes: ['github-dark', 'github-light'],
+    langs: [
+      'typescript',
+      'javascript',
+      'json',
+      'html',
+      'css',
+      'jsx',
+      'tsx',
+      'python',
+      'php',
+      'java',
+      'c',
+      'cpp',
+      'csharp',
+      'go',
+      'ruby',
+      'rust',
+      'plaintext',
+    ],
+  });
+
+  highlighterInstance = await highlighterPromise;
+  highlighterPromise = null;
+
+  // Clear the promise once resolved
+  return highlighterInstance;
+};
+
 const InlineDiffComparison = memo(({ beforeCode, afterCode, filename, language }: CodeComparisonProps) => {
   const [isFullscreen, setIsFullscreen] = useState(false);
+
+  // Use state to hold the shared highlighter instance
   const [highlighter, setHighlighter] = useState<any>(null);
   const theme = useStore(themeStore);
 
@@ -554,34 +599,32 @@ const InlineDiffComparison = memo(({ beforeCode, afterCode, filename, language }
   const { unifiedBlocks, hasChanges, isBinary, error } = useProcessChanges(beforeCode, afterCode);
 
   useEffect(() => {
-    getHighlighter({
-      themes: ['github-dark', 'github-light'],
-      langs: [
-        'typescript',
-        'javascript',
-        'json',
-        'html',
-        'css',
-        'jsx',
-        'tsx',
-        'python',
-        'php',
-        'java',
-        'c',
-        'cpp',
-        'csharp',
-        'go',
-        'ruby',
-        'rust',
-        'plaintext',
-      ],
-    }).then(setHighlighter);
-  }, []);
+    // Fetch the shared highlighter instance
+    getSharedHighlighter().then(setHighlighter);
+
+    /*
+     * No cleanup needed here for the highlighter instance itself,
+     * as it's managed globally. Shiki instances don't typically
+     * need disposal unless you are dynamically loading/unloading themes/languages.
+     * If you were dynamically loading, you might need a more complex
+     * shared instance manager with reference counting or similar.
+     * For static themes/langs, a single instance is sufficient.
+     */
+  }, []); // Empty dependency array ensures this runs only once on mount
 
   if (isBinary || error) {
     return renderContentWarning(isBinary ? 'binary' : 'error');
   }
 
+  // Render a loading state or null while highlighter is not ready
+  if (!highlighter) {
+    return (
+      <div className="h-full flex items-center justify-center">
+        <div className="text-bolt-elements-textTertiary">Loading diff...</div>
+      </div>
+    );
+  }
+
   return (
     <FullscreenOverlay isFullscreen={isFullscreen}>
       <div className="w-full h-full flex flex-col">
@@ -602,7 +645,7 @@ const InlineDiffComparison = memo(({ beforeCode, afterCode, filename, language }
                   lineNumber={block.lineNumber}
                   content={block.content}
                   type={block.type}
-                  highlighter={highlighter}
+                  highlighter={highlighter} // Pass the shared instance
                   language={language}
                   block={block}
                   theme={theme}
diff --git a/app/lib/stores/files.ts b/app/lib/stores/files.ts
index a976c3a9..e2d8e40f 100644
--- a/app/lib/stores/files.ts
+++ b/app/lib/stores/files.ts
@@ -692,27 +692,9 @@ export class FilesStore {
   #processEventBuffer(events: Array<[events: PathWatcherEvent[]]>) {
     const watchEvents = events.flat(2);
 
-    for (const { type, path: eventPath, buffer } of watchEvents) {
+    for (const { type, path, buffer } of watchEvents) {
       // remove any trailing slashes
-      const sanitizedPath = eventPath.replace(/\/+$/g, '');
-
-      // Skip processing if this file/folder was explicitly deleted
-      if (this.#deletedPaths.has(sanitizedPath)) {
-        continue;
-      }
-
-      let isInDeletedFolder = false;
-
-      for (const deletedPath of this.#deletedPaths) {
-        if (sanitizedPath.startsWith(deletedPath + '/')) {
-          isInDeletedFolder = true;
-          break;
-        }
-      }
-
-      if (isInDeletedFolder) {
-        continue;
-      }
+      const sanitizedPath = path.replace(/\/+$/g, '');
 
       switch (type) {
         case 'add_dir': {
@@ -738,38 +720,21 @@ export class FilesStore {
           }
 
           let content = '';
+
+          /**
+           * @note This check is purely for the editor. The way we detect this is not
+           * bullet-proof and it's a best guess so there might be false-positives.
+           * The reason we do this is because we don't want to display binary files
+           * in the editor nor allow to edit them.
+           */
           const isBinary = isBinaryFile(buffer);
 
-          if (isBinary && buffer) {
-            // For binary files, we need to preserve the content as base64
-            content = Buffer.from(buffer).toString('base64');
-          } else if (!isBinary) {
+          if (!isBinary) {
             content = this.#decodeFileContent(buffer);
-
-            /*
-             * If the content is a single space and this is from our empty file workaround,
-             * convert it back to an actual empty string
-             */
-            if (content === ' ' && type === 'add_file') {
-              content = '';
-            }
           }
 
-          const existingFile = this.files.get()[sanitizedPath];
+          this.files.setKey(sanitizedPath, { type: 'file', content, isBinary });
 
-          if (existingFile?.type === 'file' && existingFile.isBinary && existingFile.content && !content) {
-            content = existingFile.content;
-          }
-
-          // Preserve lock state if the file already exists
-          const isLocked = existingFile?.type === 'file' ? existingFile.isLocked : false;
-
-          this.files.setKey(sanitizedPath, {
-            type: 'file',
-            content,
-            isBinary,
-            isLocked,
-          });
           break;
         }
         case 'remove_file': {