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We have in earlier papers presented an extension of Mueller's dipole cascade model, which includes subleading effects from energy conservation and running coupling as well as colour suppressed effects from pomeron loops via a "dipole swing". The model was applied to describe the total cross sections in pp and γ * p collisions. In this paper we present a number of improvements of the model, in particular related to the confinement mechanism. A consistent treatment of dipole evolution and dipole-dipole interactions is achieved by replacing the infinite range Coulomb potential by a screened potential, which further improves the frame-independence of the model. We then apply the model to elastic scattering and diffractive excitation, where we specifically study the effects of different sources for fluctuations. In our formalism we can take into account contributions from all different sources, from the dipole cascade evolution, the dipole-dipole scattering, from the impact-parameter dependence, and from the initial photon and proton wavefunctions. Good agreement is obtained with data from the Tevatron and from HERA, and we also present some predictions for the LHC.