I know they're citing the Diplomatic and Consular Premises Act of 1987, which allows the Home Secretary to withdraw the diplomatic status of an embassy - but that, let's be clear, is a nuclear option, more appropriate for cases such as that of the Libyans in 1984, where they were actually shooting from the embassy windows. All the Ecuadorians are doing is harbouring someone the UK authorities would like to arrest, just as embassies of all stripes have done for centuries. Do we believe that the UK government would be taking the same line if Assange were being sheltered by, say, the Chinese or the French? Thought not. I don't agree with every claim about British imperialism emanating from South America (cf. Argentina), but in this case the Ecuadorians are right on the money.
Only, I do suspect that the British are acting as someone else's catspaw here. The crimes Assange is accused of are ones I consider serious, but the UK government has never acted with this degree of rigour to extradite alleged foreign rapists before. Compare and contrast the situation in 2004, when it actually made arrangements to allow the well-known child molester Roman Polanski to sue Vanity Fair in London without having to enter the country, hence avoiding the necessity of extraditing him to the USA. With that history of bending over backwards to provide assistance to rapists, why should we believe them now?