I read the main objection as being with an airline exploring option to put a traveler on a no-fly list. Not due to anything related to security, but purely as a punishment for exploring compensation options. This, in my book, is VERY bad and and deserves public shaming of the airline, complaints to regulators, etc. etc.

Everything else IMO is just fine. The airline landed the plane safely, made some promises (including a single room), could not keep all of those promises, the passenger pushed for more compensation than what airline offered, etc. That happens thousands of times every day all over the world. But this does not remove the big black mark of exploring putting a passenger on a no-fly list. My 2c.