Most of the squirrels that I've taken were killed with .177 caliber Crosman Premier Hollowpoint pellets. Those 7.9 grain pellets fly at about 900 FPS out of my Daisy Powerline 1000 air rifle. Pellets that I've recovered were maybe .22 inches in diameter when expanded. I've taken squirrels with head and body shots offhand at 10-12 yards with that thing. Never had any trouble with the rifle or the ammo on squirrel.
Whatever .22 ammo you use will be slightly larger in diameter, several times heavier and at least 30-40 FPS faster than my .177 pellets, even out of a 4 or 5 inch barrel. The Rugers generally have pretty good sights, too.
Hollow points or ball ammo, a headshot is still a headshot, and a miss is still a miss. I can agree that properly expanded .22 hollow points are nice, but you're still shooting at a 1-pound rodent. How much bullet do you need for that?
The moral is: Shot placement is most important, and practice makes perfect.