Reasonable people can disagree on what's reasonable. The reality is that if DL made every customer "feel totally whole" for every injustice, indignity, weather delay, etc., airplane tickets would be much, much more expensive.
That is true, but this situation is far different than an WX or even a MX.
I would go as far as to say this is one of the rare air travel cases where casual damages should be in play. The failure on DL's part here had nothing to do with a failure to provide transportation, which is understandably something that can happen.
Additionally, DL telling the pax to lie to customs (so as to take DL off the hook for the passport issue), is beyond belief. Hopefully the OP has a witness. I would be prepared to take this quickly past the standard customer service (unless they surprising make good, which I seriously doubt).
If the OP has any legal friends, get ready to have them write DL a letter.