GIT_EXTERNAL_DIFF overrides diff.external, but it should be OK to override just for diff
Alternative is to override diff.external
https://difftastic.wilfred.me.uk/git.html

Also override diff.tool

Also need to override for git-log and friends
https://git-scm.com/docs/git-diff#Documentation/git-diff.txt---ext-diff

for delta https://dandavison.github.io/delta/configuration.html
set --no-pager or GIT_PAGER (not sure of precedence) https://git-scm.com/docs/git-config#Documentation/git-config.txt-corepager
For all (not sure) or at least diff, show, log, stash, reflog, add

--
Sidenote:
difftastic changed recommendation from difftool to ext-diff just recently. GE should change too. The problem is to get a sane configuration for WSL.
delta could be added too, maybe a generic difftool/ext.diff

It is probably enough to set diff.external in GitCommandConfiguration.cs but this handles overrides in gitattributes

diff.tool should be overridden in GitCommandConfiguration though

core.pager could be separate.

I tried to set "diff.external" to an empty string in GitCommandConfiguration.cs. It did not work in the first attempt.

Feel free to take over this PR.

Doesn't git recognize that the output is redirected and that's why does not use a pager?

All fine:

git -c diff.external= will set an empty value, not unset so that cannot be used.
Override GIT_EXTERNAL_DIFF is not enough.

diff.tool not needed here.

setting external diff in .gitattrbutes will still cause git-log etc to fail in some situations, not sure if it applies to GE use. Not now

Doesn't git recognize that the output is redirected and that's why does not use a pager?

Seem so

I see very low risk in adding the argument "--no-ext-diff".
It definitely brings an improvement.
So, I am taking it into v5.1.
If something is missing, it can be added in a follow-up.