UPDATE: the Kosovan civil aviation department just emailed me saying Eurowings backed down and will issue EC261 compensation as well as reimbursing the lost train ticket.
So for anyone claiming any and all cancellations having anything to do with COVID-19 is ineligible for compensation: not true, as I've said the whole time.
As far as I am aware, I am eligible for a refund of my entire ticket due to this flight cancellation
However, could I also opt to only fly the return journey, and get (roughly) half of my ticket value back?
That's unlikely to happen since LH would have to reprice the ticket which is complicated and will NOT result in a 50% refund. I'm guessing ...
For the stated itinerary, when flying on a non-EU carrier as you are, EU261 covers flights 3 and 4, presuming that there is no extended layover between these two flights.
Flight 3 is clearly covered by the legislation.
Flight 4 is covered as a result of a court case a few years ago that concluded that EU261 covers the connecting flight as well, even if that ...