* Case concerns diary entry that raised funding suspicion
* Result of interrogation lifts cloud over future
* Many want Sarkozy back as feud plagues conservative party (Adds prosecutor comment in paragraph 5, edits)
By Brian Love
PARIS, Nov 23 (Reuters) - A judge investigating Nicolas Sarkozy's campaign funding mistook a Colombian hostage for a billionaire backer of France's right-wing party when he queried a meeting in the ex-president's diary, a lawyer for Sarkozy said.
Sarkozy, who lost power in May, was questioned for 12 hours on Thursday by a judge who is trying to establish whether his election win in 2007 was aided by illegal funding from France's richest woman, 90-year-old Liliane Bettencourt.
Rather than Bettencourt, daughter of the founder of the L'Oreal cosmetics empire, the diary entry referred to the Franco-Colombian Ingrid Betancourt, who was held hostage in Colombia for six years and freed in 2007, lawyer Thierry Herzog told French radio.
Herzog said judge Jean-Michel Gentil had made a note reading "name spelt wrongly" next to the name "Betancourt" on a list of Sarkozy's appointments, implying that he had believed the meeting was with the L'Oreal heiress, but eventually acknowledged his mistake.
In a statement on behalf of the judge, Bordeaux prosecutor Claude Laplaud did not deny Herzog's account, but said Sarkozy had not been summoned specifically to discuss the meeting with Ingrid Betancourt, and had not been questioned about it.
Gentil decided after the questioning not to open a full-blown inquiry into Sarkozy, who has bowed out of politics but remains a possible candidate for the conservative camp in the next presidential contest in 2017.
Sarkozy's departure has sparked a feud within his UMP party, where two men who faced off in an internal leadership election are exchanging accusations of fraud.
A BVA poll released on Friday indicated that 73 percent of conservative voters want Sarkozy back in politics.
It pointed to plunges in the popularity of the two men who fought to take his place as leader of the mainstream right, Francois Fillon and eventual winner Jean-Francois Cope.
Herzog said the ex-president, who denies any wrongdoing, was relieved after Thursday's meeting with the magistrates.
Gentil and two other judges who questioned Sarkozy classified him as a witness, a status in French judicial procedure that signals he is not liable to face trial.
Initial suspicions were fuelled three years ago when a woman who worked as an accountant for the mentally frail Bettencourt, now aged 90, alleged that a large cash withdrawal had been earmarked for Sarkozy's campaign.
Liliane Bettencourt's family has long had close connections with the UMP party of Sarkozy, who lost presidential immunity when he left office.
"For him and for me, this affair is an affair that no longer exists," said Herzog.
Sarkozy may also be asked to testify in two other judicial investigations, concerning the terms of a submarine sale to Pakistan and lavish spending on opinion polls by his office when he was president.
While the BVA poll suggested that three in four conservatives want to see Sarkozy back in action, it also indicated that 65 percent of French voters more generally do not want him back after he lost May's presidential election to Socialist Francois Hollande. (Additional reporting by Claude Canellas; Editing by Kevin Liffey)