Yes, this sucked. I just had a 1 hour delay on a 1 hour flight (AMS-ZHR). Unfortunately, no compensation until its a 2 hour delay (but thank god it was only one hour!). Passengers who had a layover were noticeably less happy.
While a lot of airlines try to weasel out of their obligations (mechanical failue, for example, which however is the airline's responsibility) I would think such a case is pretty clear cut.