Those quoting EU Reg 261, whether it be the media, govt ministers or forum members saying the airlines have to care for and compensate passengers should read the whole regulation. In particular para 14 which says:
14) As under the Montreal Convention, obligations on operating air carriers should be limited or excluded in cases where an event has been caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier.
I would suggest the volcanic ash situation is covered by "meteorological conditions incompatible with the operation of the flight" thus absolving the airlines from having to care for and compensate passengers. One occasion where Mr O'Leary is right to complain?
Doesn't help if you are stuck at an airport away from home, but that is what the reg says.