diff --git a/src/main.c b/src/main.c
index ca8de17..3209183 100644
--- a/src/main.c
+++ b/src/main.c
@@ -416,13 +416,8 @@
     TIME_MSG("expanding arguments");
 
 #ifdef FEAT_DIFF
-    if (params.diff_mode)
-    {
-	if (params.window_count == -1)
-	    params.window_count = 0;	/* open up to 3 windows */
-	if (params.window_layout == 0)
-	    params.window_layout = WIN_VER;	/* use vertical split */
-    }
+    if (params.diff_mode && params.window_count == -1)
+	params.window_count = 0;	/* open up to 3 windows */
 #endif
 
     /* Don't redraw until much later. */
@@ -556,6 +551,17 @@
     }
 #endif
 
+#ifdef FEAT_DIFF
+    /* Decide about window layout for diff mode after reading vimrc. */
+    if (params.diff_mode && params.window_layout == 0)
+    {
+	if (diffopt_horizontal())
+	    params.window_layout = WIN_HOR;	/* use horizontal split */
+	else
+	    params.window_layout = WIN_VER;	/* use vertical split */
+    }
+#endif
+
     /*
      * Recovery mode without a file name: List swap files.
      * This uses the 'dir' option, therefore it must be after the
@@ -1357,7 +1363,7 @@
 	disallow_gui = TRUE;
 
     /* TODO: On MacOS X default to gui if argv[0] ends in:
-     *       /vim.app/Contents/MacOS/Vim */
+     *       /Vim.app/Contents/MacOS/Vim */
 #endif
 
 #ifdef FEAT_EVAL
diff --git a/src/testdir/Make_vms.mms b/src/testdir/Make_vms.mms
index 767ab78..57101fc 100644
--- a/src/testdir/Make_vms.mms
+++ b/src/testdir/Make_vms.mms
@@ -4,7 +4,7 @@
 # Authors:	Zoltan Arpadffy, <arpadffy@polarhome.com>
 #		Sandor Kopanyi,  <sandor.kopanyi@mailbox.hu>
 #
-# Last change:  2005 Jul 05
+# Last change:  2006 Mar 15
 #
 # This has been tested on VMS 6.2 to 7.2 on DEC Alpha and VAX.
 # Edit the lines in the Configuration section below to select.
@@ -58,7 +58,8 @@
 	 test38.out test39.out test40.out test41.out test42.out \
 	 test43.out test44.out test45.out test46.out \
 	 test48.out test51.out test53.out test54.out test55.out \
-	 test56.out test57.out test58.out test59.out test60.out
+	 test56.out test57.out test58.out test59.out test60.out \
+	 test61.out
 
 .IFDEF WANT_GUI
 SCRIPT_GUI = test16.out