I have a similar issue. I'm pretty sure it's something Google Drive is doing.
For instance, if I have a text file (8 bit ascii, say foo.txt) it uploads fine and is readable in google docs, but if the folder containing foo.txt is synchronized, if I then open my local (synchronized) copy of foo.txt, it's in html. I'm guessing that google is using epub style html layout for internal storage and converting in/out as items are uploaded/downloaded - and there's no conversion for direct file access.
This seems to have broken compatibility with OfficeSuitePro and Docs2Go as well.
I tried clicking the 'translate' check box in the account, deleting all local files and re-running synchronize. This doesn't fix the issue.
Given that GoogleDrive can keep offline copies this is not a big issue for me, just mentioning it as a data point.