To answer your last question, you can have a stopover or a open jaw, but not both. Also, the agent was correct, it would require two awards.

The reason is because you are trying to get a third region in. That is, your award is SYD-YYZ, so ANZ -> N. America. Mexico is in the Central America zone, so you would be going to a third zone. That is rarely allowed, usually only if you have to transit through a third zone due to routing restrictions. This is clearly not the case here. You also can't have an open jaw into a third region.

What you might be able to do is get a SYD-PVR award. You will obviously have to transit N. America, so you should be allowed a stopover here. I'm not sure if you could make it YYZ, but I would guess not, since it would probably violate the most direct rouing route. Although I don't know if that is enforced for stopovers, or if you only need the most direct routing to your stopover point, and then your final destination...

If you can't do that you might be best to schedule your stopover in N. America with an award to YYZ or PVR and make it somwhere, e.g. LAX or SFO, and just buy a ticket to PVR or YYZ, whichever is cheaper. If the price is prohibitive, you could get another award, but at 35k/60k to PVR and 25k/40k to YYZ, I think it would be more economical to buy a ticket.