I'm not sure if it's an oversight or typo, but in AA's response they keep referencing EU261, while technically what you're after is UK261. I get they're basically the same thing, but maybe the agent is just clueless and really thinks it doesn't apply, even though their reasoning doesn't pass either.

I would reply back that again the flight in question was LHR-CLT, so EU261 terms do not apply, and ask again for UK261 downgrade compensation of which AA is clearly liable based on XYZ (copy/paste terms from the UK261 website and give them a link).