I have understood these new laws differently in regards to delays. I have interpreted it as a protection that gives you flexability.

For example. PAX A faces a long delay with one airline. The ticket can not be honored by another carrier for re-booking. So that you have the option to purchase a new ticket yourself with another carrier the carrier should offer a refund of your existing ticket and you then have the flexability to make other travel plans.

The rule does not state give you a refund and then provide service to your destination. It says they must get you back to where you started your trip, meaning that if you are conecting they would have to get you back to your departure airport.

I thought the refund was for those not accepting the meals and hotel while waiting to continue journey.

I saw this as a rule against the low-cost airlines and charter carriers and not against the regular carriers that can often rebook and re-route those facing long delays.

The rule then goes on to say that you can claim actual damages caused by this delay of around 5000 euros.

The experience you described sounds like they followed this rule a hotel overnight did not prove necessary, but they provided food and communications.