I'll leave the debate about compliance with aviation law to the professionals, but would like to make a point about the commercial aspects.
Under the Consumer Rights Act, the consumers would be perfectly entitled to take action to gain redress for the way they were treated.
Selling people regular seats and then putting them into jump seats (and moving them to run the service) is unlikely to go down well with a judge.
So anyone criticising the consumers for seeking proper compensation is well off the reality.
I don't blame them for taking pix for evidence, either, as the subsequent offer of £30 was derisory and sadly predictable - the airline industry does have a rep for behaving like cheapskates in this type of situation.
To support this view from personal and recent experience, last year, my wife and I had booked premium economy seats on a TATL flight with a UK airline, who then cancelled the flight and then reinstated it with an all Y aircraft; amazingly, they didn't wish to accept a cancellation from us, despite this being an absolute right under EC261 and also falling foul of the CRA. Only when threatened with small claims action did they change their view.
So my sympathy is with the pax here, they did not get what they paid for and they were right to go the press.