FlyerTalk Forums - Help with overbooked hotel

I made online reservations through Travelocity April 29 for hotel accomadations in Sydney during the Olympics Sept 23-26 and Sept 29 through Oct 1st. The reservation was confirmed and I was given a booking reference. A week later I was called by Travelocity they informed me that they were contacted by Pegasus Solutions and that the hotel did not have availability. I contacted Pegasus and they said their was an error and they would attempt to place those of us with reservations in alternative acoomadations. I called back a week later and was told they were working on the placement. Last Thursday June 15 after waiting over a month I called Pegasus and they told me they were no longer handling this problem because it was a hotel error and this was now being handled by the hotel. Contacted the person they refered me to at the hotel through email because of the time differnce in OZ and he had me contact a tour operator who had availability. They do have availability but they room cost more than twice as much as the room I have reservations for. So my question is should the hotel I have the reservation with pay the difference since they are in effect walking me? Who is responsible for this and what are my options. Any help will be greatly appreaciated since this trip is part of my honeymoon.

Thanks

Student