Revisit your identity mapping for S = {a, b, c, ...}. The mapping is f(x) : x -> {x}. You correctly observed that {} is outside the range of this mapping. So is {a,b}, and so is {a,c}, and so is....
Exactly one is nowhere to be found.
S is an infinite set.
H is a set that its members are not mapped with all |S| members of set S, and is has exactly one member for any mapping between S and P(S).
Here is an example,
without loss of generality:
If S={a,b,c,...} then the distinct result of the distinct mapping
a --> {a}
b --> {b}
c --> {c}
...
is {}.
In that case H={{}}, where a member of P(S) like {a,b} is not a member of H because a --> {a} or b --> {b}, so what you wrote above is irrelevant to my "weaker" argument.
The "weaker" version of my argument holds, is as follows:
For any mapping from set S to set P(S) there is a bijection from all |S| members of set S to |S| members of set P(S), and also there is set H that has
exactly one member of set P(S) that not in the range of all the members of set S.
In other words, |S|+|H| (where |H| is
exactly 1) holds for any mapping from set S to set P(S).
|S|+|H| does not mean that H member is added to set S.
For any mapping from set S to set P(S) the best that can be shown is |S|+|1|, but by the transfinite number system |S| = |S|+1, so for any mapping from set S to set P(S) it is not shown that |S|<|P(S)|, so the standard proof of Cantor's theorem does not hold if S is an infinite set.
EDIT:
The only set defined in the proof is a diagonal set
which has
exactly one member for any mapping from set S to the diagonal set.
So the same result holds in case of Cantor's diagonal argument (
https://en.wikipedia.org/wiki/Cantor's_diagonal_argument) because for any mapping from set S to the diagonal set the best that can be shown is |S|+|1| (H has
exactly 1 member of the diagonal set that is not in the range of all S members, but by the transfinite number system |S| = |S|+1, so for any mapping from set S to the diagonal set it is not shown that |S|<|the diagonal set|.