The police have no powers to revoke a driver's licence or to disqualify them from driving (which are not the same thing). Only a court can disqualify someone from driving. (The DVLA can, in certain circumstances - which are not relevant here - revoke a licence).
If your neighbour has a good solicitor, the Crown Prosecution Service might find it difficult to get a conviction for drink-driving. The only evidence that he was driving under the influence of alcohol comes from you. The defence could seek to show that the defendant was not always in your view from the moment that he left his car until the time he was breathalised (assuming that he was). This could lead to the possibility that he consumed the alcohol after, rather than before, driving. Further, the defence could seek to show that your evidence should be disregarded by the court because your disputes with your neighbour might lead you to give false evidence against him.
I'd actually be very surprised if the CPS decide to prosecute your neighbour for drink-driving. However, if they managed to obtain a successful prosecution, I doubt that his medical problems would be regarded as a good enough reason for the court not to impose a driving ban.
Chris