Diabetic Retinopathy: Given the patient's history of type 2 diabetes and the presence of multiple microaneurysms and flame hemorrhages on funduscopic exam, diabetic retinopathy is the most likely diagnosis. The symptoms and findings are consistent with non-proliferative diabetic retinopathy, which is a common complication of diabetes.

Hypertensive Retinopathy: The patient's history of hypertension could contribute to retinal changes, including microaneurysms and hemorrhages, similar to those seen in diabetic retinopathy. However, the presence of diabetes makes diabetic retinopathy more likely.
Age-related Macular Degeneration (AMD): Although less likely given the specific findings, AMD could cause blurry vision in one eye and is a consideration in a 68-year-old patient. However, the funduscopic findings do not specifically suggest AMD.

Retinal Vein Occlusion: This condition can present with sudden vision loss and retinal hemorrhages. While the patient's vision loss has been progressive over three months, retinal vein occlusion is a critical diagnosis that could be missed and should be considered, especially given the patient's vascular risk factors.
Retinal Detachment: Although the patient does not report symptoms like floaters or a curtain descending over the visual field, and the immaculate (likely referring to the macula) is described as flat, retinal detachment is a vision-threatening condition that must be ruled out.

Ocular Ischemic Syndrome: This rare condition, associated with severe carotid artery disease, can cause vision loss and retinal findings similar to those described. However, it is less likely given the lack of other symptoms suggestive of carotid disease.
Retinal Vasculitis: Inflammatory conditions affecting the retinal vasculature could present with similar findings but are less common and would typically be associated with other systemic symptoms or findings suggestive of an inflammatory process.