Well, afaik Octopus has never promised to deploy to client machines, only server.
Implemented the hack above btw, and it's slow and error prone, but works ok-ish. (did not modify squireel, made a command line app instead. Could probably be turned into a ps-script by someone more skilled than me)
I've implemented a custom solution for this. It also feels hacky, but it does work consistently. Basically our TeamCity server builds the binaries, including everything needed for releasify to work. Releasify is actually ran in the deployment process, and the results are put on the web server for clients to pull the latest version. You are right though, it's very convoluted. I plan on re-vamping soon. I will do a write up on it (one day when I get time).
An update in case someone comes across this: My solution now uses Cake to re-package and call Squirrel releasify. This could probably be wrapped up in a reusable Octopus step template. Will have a look at that when I have more time.