I don't think the above is correct - the two weeks is indeed for compensation, but VY still have to offer suitable alternative options. The issue is almost certainly that the agents have no way of booking those, so they're only wrong if they're claiming that it's outside of the regulation. Normally in such a situation, what you have to do is not take the refund - that would be the end of their obligation to you. Instead, you have to book the Ryanair flight then claim a refund of that full price from VY [you end up paying only the original price which VY keep]. Of course, you may not want to take that risk, or have the patience to persue VY for the refund in the [fairly likely] event that they refuse the payment. They may well claim that their proposed alternative was adequate, though I think the usual standard there is the time limits from the compensation regulation.

I'd advise looking through the BA forum thread on this topic - AFAIK it's the most comprehensive on FT, whereas the Other European Airlines forum doesn't get a lot of traffic. Myself I've had reimbursement from easyJet for train replacements, though that was a same day cancellation. They actually didn't dispute anything and paid pretty promptly.