I have a $2 \times 2$ matrix, $Y(x)$, with $2$ eigenvalues: $\lambda = 2,x$ where $x\in \mathbb{R}$
Now $Y(x)$ is only diagonalisable if $\lambda_1,\lambda_2$ are distinct. Are $2,x$ distinct? I think not due to the fact that $x$ can take value $2$, is this intuition correct?
Would $Y(x)$ be diagonalisable $\forall x \ne 2$?
Your statement that $Y(x)$ is only diagonalisable if $\lambda_1,\lambda_2$ are distinct is not correct.
If the eigenvalues are distinct then the matrix is diagonalisable. So, if $x\ne2$ then $Y$ is diagonalisable.
But if there are repeated eigenvalues the matrix may still be diagonalisable. For example, if $$Y=\pmatrix{2&0\cr0&2\cr}$$ then the eigenvalues are $2,2$ and $Y$ is diagonalisable. On the other hand, if say $$Y=\pmatrix{2&1\cr0&2\cr}$$ then the eigenvalues are $2,2$ and $Y$ is not diagonalisable.