What would be the best way to compare big paragraphs of text in order to tell the differences apart. For example string A and string B are the same except for a few missing words, how would I highlight these?
Originally I thought of breaking it down into word arrays, and comparing the elements. However this breaks down when a word is deleted or inserted.
You want to look into Longest Common Subsequence algorithms. Most languages have a library which will do the dirty work for you, and here is one for C#. Searching for "C# diff" or "VB.Net diff" will help you find additional libraries that suit your needs.
I saw this a few months back when I was working on a small project, but it might set you on the right track.
Usually text difference is measured in terms of edit distance, which is essentially the number of character additions, deletions or changes necessary to transform one text into the other.
A common implementation of this algorithm uses dynamic programming.
Here is an implementaion of a Merge Engine that compares 2 html files and shows the highlighted differences: http://www.codeproject.com/KB/string/htmltextcompare.aspx
If it's a one-shot deal, save them both in MS Word and use the document compare function.