function IsTextFile(const sFile: TFileName): boolean;
//thanks to Marcelo Castro - from Brazil

var
 oIn: TFileStream;
 iRead: Integer;
 iMaxRead: Integer;
 iData: Byte;
 dummy:string;
begin
 result:=true;
 dummy :='';
 oIn := TFileStream.Create(sFile, fmOpenRead or fmShareDenyNone);
 try
   iMaxRead := 1000;  //only text the first 1000 bytes
   if iMaxRead > oIn.Size then
     iMaxRead := oIn.Size;
   for iRead := 1 to iMaxRead do
   begin
     oIn.Read(iData, 1);
     if (idata) > 127 then result:=false;
   end;
 finally
   FreeAndNil(oIn);
 end;
end;

(* ----- Sample call ----- *)

procedure TForm1.Button1Click(Sender: TObject);
begin
  if OpenDialog1.Execute then
  begin
  if IsTextFile(OpenDialog1.FileName) then
  showmessage('is ascii')
  else showmessage('is BinaryFile')
  end;

end;