Have you tried the AUC?
Geoff,
As a first step I would try the Airport Users Council. They are the UK's NEB (National Enforcement Body). They may already have a handle on your particular flight (or is it flights?).
Re-scheduled implies that the flight did operate, but late and from a different departure point - rather than Squeezy reaccomodating you on another, already scheduled flight from Luton. If this is what happened I think your argument (and least in terms of what the Regulation says) is weak.
IF (and I admit it's a big IF) what they say is correct, the Regulation requires them to cover the costs of your 'care' - food, communication, hotel, transfer between airport and hotel and airport. But 'compensation' is not applicable.
Their view is that they did operate the flight, some hours late and from a different departure point.