Small Vessel Disease (SVD): The presence of mild diffuse cerebral atrophy, prominent FLAIR hyperintensity in the cerebral white matter with a periventricular and subcortical distribution, and the mention of possible subacute lacunar infarct in the right basal ganglia are highly suggestive of small vessel disease. This condition is common in elderly patients and can lead to cognitive decline.

Demyelinating Disease: Although less common in this age group, the MRI findings of FLAIR hyperintensity and diffusion restriction in some lesions could suggest a demyelinating process. However, the distribution and patient's age make this less likely than SVD.
Alzheimer's Disease: Given the patient's memory issues over the last 12 months, Alzheimer's disease should be considered. The mild diffuse cerebral atrophy could be consistent with this diagnosis, although the presence of significant white matter changes might suggest a vascular component as well.
Mixed Dementia: This diagnosis combines elements of Alzheimer's disease and vascular dementia, which could explain both the cognitive decline and the imaging findings of cerebral atrophy and white matter changes.

Multiple Sclerosis (MS): Although MS is less common in this age group and the presentation might be atypical, it's crucial not to miss this diagnosis due to its significant implications for treatment and prognosis.
Vasculitis: Inflammatory vasculitis affecting the central nervous system could present with similar imaging findings and would require urgent treatment to prevent further damage.
Cancer (e.g., Lymphoma, Metastases): Although the MRI does not show a mass effect or acute intracranial hemorrhage, it's essential to consider malignancy due to its potential for rapid progression and the need for prompt intervention.

CADASIL (Cerebral Autosomal Dominant Arteriopathy with Subcortical Infarcts and Leukoencephalopathy): This is a rare hereditary condition that affects the blood vessels in the brain, leading to subcortical strokes and dementia. It could be considered given the patient's white matter changes, but it's less likely due to the late onset.
Posterior Reversible Encephalopathy Syndrome (PRES): Although typically associated with specific clinical contexts (e.g., hypertension, eclampsia, immunosuppression), PRES could present with similar white matter changes and should be considered if there are appropriate clinical risk factors.