Under EC 261 rules (ie European law) the compensation is 75% of the ticket price for a flight over 3,500km. So you at least will get a decent amount.

Airlines tend to make these rules centrally and the foot soldiers on the ground just do what the rulebook says. I don't think they have much discretion to upgrade you if the rules say they can't. I think you are within your rights to insist to fly in the cabin you booked. There is a vast amount of discussion about this on the BA forum, and all European airlines are bound by the same rules.