Looking at the wider picture, and in fairness standing for a moment in the shoes of a carrier ...... we all know that the original legislation, despite its apparent clarity, left room for differing opinion and hence dispute. There is understandably an industry-wide view that the notion of a 'full' 75% refund for the very limited 'harm' suffered on one sector of a multi-sector trip is just way too generous and unreasonably biased in favour of the consumer ; and then on the other side there is the deterrent factor highlighted by eternaltransit.
Can't remember whether it was here or over on the BA forum, but some time ago there was a poster (with seemingly professional legal expertise) who stated that there was a proposed amendment to EU261 currently 'on the table' and that - if eventually enacted - would swing things back firmly in the favour of carriers by specifying beyond doubt that any 'downgrade' refunds would apply on a purely per sector basis, rather than calculated against full fare as paid for the entire journey. If you take a dispassionate view (and set aside any rosy thoughts of personal profit ....!!) then this would seem more balanced & sensible.
That said, the most recent Court ruling involving EU261 did favour the consumer and in very clear fashion, as many members will have heard/read. It was about delays rather than downgrades .....Ryanair had pleaded that the 6 year rule on retrospective claims be reduced to two ; they lost their case but I believe are considering an appeal of the decision.