Binary diff/patch for large files on linux?

You should probably take a look at the rsync-related tools: rdiff and rdiff-backup. The rdiff command lets you produce a patch file and apply it to some other file.

The rdiff-backup command uses this approach to deal with entire directories, but I'm guessing you're working with single-file disk images, so rdiff will be the one to use.

xdelta can do everything you want. Fair warning though, if your images aren't very similar, you can end up with a very large patch, because xdelta uses half of the defined memory buffer for finding differences. More information is available at the TuningMemoryBudget wiki page. Increasing the buffer size may help out quite a bit.

bsdiff is another option, but it's very RAM hungry and completely inappropriate for anything the size of a disk image.

bsdiff is quite memory-hungry. It requires max(17*n,9*n+m)+O(1) bytes of memory, where n is the size of the old file and m is the size of the new file. bspatch requires n+m+O(1) bytes.