OK, so the key thing here is that BA "placed" you on VS, rather than giving you a range of options. Which in turn simplifies some of the possible outcomes.

I first need to add my welcome to you daveart on behalf of Flyertalk and the BA forum, I'm sorry to hear of this turn of events but I hope this forum will help you here, and for any future travels.

This looks like a downgrade. Recent court rulings have made this more complicated and less consumer friendly, some more details here:
http://www.flyertalk.com/forum/26864509-post636.html

In essence I think you should get back 75% of the Avios and perhaps some of the cash component. BA may well be working on a refund not based on EC261 - this depends on whether you clearly and explicitly invoked this Regulation in your claim.

This has the potential to get very complicated, so you may need to wait until you hear more from BA. The refund - if not EC261 - could take a very long time to process, so either you will need to be patient or play hardball with BA. There's no sensible middle ground here. If playing hardball, you'll need to calculate what you are owed. The SMEs in this forum can give you help here if we know the precise amount of Avios and cash you paid, and whether it was a peak or off peak redemption.