Was this a prepaid room? I didn't see that in the OP, but if so it certainly impacts the calculus. Because in the absence of prepayment, Option #1 if they won't give me the room I reserved, or an acceptable substitute, is I stay somewhere else. In Mexico (or really anywhere in latin america), I wouldn't spend much time arguing with the property, because that is just not likely to accomplish anything. It's a different service culture (not necessarily better or worse, just different).

(And if I have prepaid, I certainly consider a chargeback - goods or services not provided - as a potential remedy.)