The whole EU pax compo and "extraordinary circumstances" thing is a mess. Fundamentally I can see that if people are stuffed around because of things like overbooking then yes they should be looked after. Equally the airline can't write an unrealistic schedule without proper crew/eng cover and then claim "unforeseeable" technical problems when it doesn't work out.
Some relatives of mine had a long delay (7-8 hours) recently caused by the airline "changing a wheel" which the airline is claiming is "extraordinary circumstances." Honestly the airline is taking the Pxss at that one, reasonable spare provisioning and eng cover and that's a 40 minute job done every day, heck our engineers did one in a 30 minute turn around the other week a la F1 pit crew, but without the forgotten wheel nut. My point is that by claiming every little snaggette is "extraordinary" the airlines have damaged their own reputations and customer trust.
However, I'd suggest an unplanned engine change, like the originator of this thread is talking about, IS extraordinary. Engines these days do tens of thousands of hours on the wing, are amazingly reliable and cost enormous sums to have spares of hanging about. It's just not practicable to do it quickly.
Simply put, the airline put you up in a hotel room following an unforeseen and really rather unusual event. Sorry the room turned out to be a bit rubbish, but trying to find several hundred hotel rooms at no notice is a bit tricky.