As to EC 261/2004, pretty much a lost cause here. WX closing in while enroute is just one of those things.

As to the relative costs of a diversion vs. housing people overnight:

Very doubtful. The rooms are booked on dirt cheap contract rates and often at not particularly desireable properties. If you pay GBP 100, the contract might be fore GBP 35-40.

In addition, the aircraft is now stuck at the "wrong" airport and needs to be ferried, presumably empty of revenue pax over to where it belongs. That is extraordinarily expensive and, depending on timing, may mean that the outbound flight for which that aircraft was scheduled, may be delayed/cancelled.

As a customer issue, I would prefer to get to my destination, albeit late, rather than sometime the next day.