Originally, the term "diva" was applied to the leading female singer

Correct idioms are:- Differentiate between x and y / Differentiate x from y

Per the meaning of the sentence, contrast keyword is desired in the second part of the sentence
C and D are straightaway out because of missing contrast
A is out because of Idiom issue I.e Between is missing
Semicolon in the non underlined part of the sentence indicates "conjunctive adverb" is a better choice than a "conjunction"
E is the answer

A) however, in recent years, the term has come to differentiate the really thrilling stars of this genre and the mere good ones.
Idiom error

B) but, in recent years, the term has come to differentiate the really thrilling stars of this genre from the merely good ones.
But is conjunction; however, we require "conjunctive adverb" here

C) moreover, in recent years, the term has come to differentiate the really thrilling stars of this genre from the mere good ones.

Missing contrast

D) and, in recent years, the term has come to distinguish between the really thrilling stars of this genre from the merely good ones.
Missing contrast

E) however, in recent years, the term has come to differentiate the really thrilling stars of this genre from the merely good ones.
Right answer