I agree that the OP has way over-complicated this, but in reality there is zero chance of ET paying up on this (I think that they will argue an inflight problem is de facto exceptional, and I'm minded to agree with them) and thus - does the OP have the will to take this up legally, in Ethiopia?
I am sorry, but I must honestly say that I very much dislike this comment.
It doesn't matter at all whether the airline is willing to pay or not. A court will decide that.
A technical problem is most likely not considered to be extraordinary.
Moreover, the OP doesn't have to sue ET in Ethiopia. He can do that in Spanish court, which has jurisdiction over MAD. This has been established from a legal perspective.
The problem I see is if the delay on the ADD-SIN segment is covered by EC261/2004. Yes, I've noticed the court verdicts, but I haven't read them in full.
A. If MAD-ADD is just delayed by an hour, but it causes a misconnect in ADD, which puts the delay at the final destination (KUL) at more than 4 hours -> EC261/2004 def. applies;
B. If the MAD-ADD segment did not cause the delay of more than 4 hours in KUL, I am not sure about EC261/2004 cover.