This workaround works for me:
GIT_WORK_TREE="$(git rev-parse --show-toplevel)" GIT_DIR="$(git rev-parse --git-dir)" git difftool --tool=meld --dir-diff
You can of course put in --cached as per your example.
That's quite a lot to type so you can add the following alias to your ~/.gitconfig
:
[alias]
submeld = !git --work-tree "$(git rev-parse --show-toplevel)" --git-dir "$(git rev-parse --git-dir)" difftool --tool=meld --dir-diff