"Jettesen",
You say that Ryanair's entry on the Madrid-London route is "hardly likely to effect EZY that much". I'd agree with you if we were in favourable economic times and the market was growing. Ryanair might be scheduling only one flight daily in each direction (albeit with 189 seats to fill) but exactly where will their passengers come from except mainly from the existing "low cost" operators?
I predict that easyJet will be unable (or unwilling) to match Ryanair's fares. Given the dire state of the Spanish economy I can see Ryanair being the winner and easyJet the loser. Who would turn their nose up at a return fare of 12.4 euros (or £11 if starting in London) before optional charges? Not me! I'd be daft to fly easyJet.
The schedules look unattractive from some UK passengers' point of view but remember that a midnight arrival into Barajas is not seen in the same way by the Spanish (I think last departures on the Madrid metro, including from Barajas, are around 1.30am) and that an 8pm departure from London will be attractive to those who can only travel after work.
Ryanair may only be scheduling one flight a day right now but don't be surprised if the frequency is increased. This is precisely what happened, for example, on the Stansted-Alicante route. I know this route very well and have switched from easyJet (which inherited me from Go) for most of my trips simply because Ryanair offers better value (plus better punctuality and a much more civilized boarding "experience", especially at Stansted).
Ryanair's entry on the Madrid-Gatwick route will definitely hurt easyJet.