It was private CCTV on private property. Nicky doesn’t have to block anyone out. Lydia has no rights.
Yes, legally speaking Lydia has no rights for a libel (written falsehoods) or slander (oral falsehoods) case. As you correctly point out, it's domestic CCTV so data protection laws in the UK don't apply, as long as the footage captured is on Nicky's property/grounds. Nicky would require justification for publicising this footage, which is easily argued in that Lydia continues to, either inadvertently or deliberately, make indirect claims of her hair damage (the bleached four times in one day, for example.)
Lydia couldn't sue Nicky for defamation of character if quite simply there has been no defamation. If she's acted in a unprovoked harassing manner, then there has been no FALSE STATEMENT of her that unjustly harms her reputation. The CCTV intrinsically speaks for itself. She can't deny it's her. It's quite straightforward, unlike for example, the Coleen Rooney vs Rebecca Vardy case. For those not in the UK, they're both footballer's WAGS, and Coleen made public that Rebecca leaked info to the press on her seeking gender fertility treatment from her private Instagram account. Prior to this, Coleen had planted stories with narrowing selective viewing of the followers she suspected of leaking until Rebecca was the only one left. Legal technicalities come into play as Rebecca can counter argue that she wasn't the only one who had access to her phone or her account, or that she was discussing Coleen's personal matters with a mutual friend and a third party overhead this, for example.
Lydia would essentially be backed into a corner. In her best interests, she could either acknowledge her wrongs (hell would freeze over first) or remain silent. Checkmate. If she did retaliate with her 'version of events' then she needs to tread carefully regarding her claims and have evidence to back this up, or Nicky could issue her own defamation lawsuit against Lydia. I know Lydia has already alluded to the causation of her hair damage being bleached four times, but she's not actually directly incriminated Nicky yet by not identifying any names, so Nicky's grounds for a defamation case currently are weak. I imagine Nicky archived her post whilst she sought legal advice. The only ramification Nicky would have in publicising the footage is Lydia's die hards getting salty at her.
Shoot your shot Nicky.
I can't wait to witness Lydia living her best life on the loo in the powder room.