The author is also thinking like an engineer rather than a lawyer.
His entire claim is based on a paragraph of the directive for 'cancellations'. Authors claim is that the flight was 'cancelled' and a 'new' flight was put on the next day, and that this is a cancellation because the flight number changed. This definition is tenuous - Airlines can (and do) swap flight numbers and even physical aircraft and this would not class as a cancellation (and this is what the appeals found in this case). A cancellation realistically means that the airline could not transport the customer to the destination at all, and the 'flight' was cancelled rather than being rescheduled to another time.
Airlines claim is that his flight was rescheduled, and he declined to even go on the rescheduled flight and then expected compensation in-line with a cancellation. This is probably fairly accurate.
So if it's not a cancellation, what does the legislation actually say his compensation should be?
* (a) meals and refreshments in a reasonable relation to the waiting time
* (b) hotel accommodation
* (c) transport between the airport and place of accommodation (hotel or other).
* 2. Two telephone calls, telex or fax messages, or e-mails.
* 3. (If longer than 5 hours) Reimbursement within seven days, by the means provided for in Article 7(3), of the full cost of the ticket at the price at which it was bought, for the part or parts of the journey not made.
Noting that there is no cash alternative to a, b & c (which isn't explicitly stated, but is implied in the article) the request of c€125 implied in his article is not covered under the relevant parts of this European directive.
Note: This is only my view on reading it but it seems pretty clear, but IANAL!