Inglebybro,
I certainly understand your frustrations as it appears that VS is not prepared to get you to your destination as originally booked.
When the Regulation was being drafted this article caused a lot of discussion and the basic airline groups diverged significantly on what their obligations should be. The LCCs, for example, refused to consider that they should be obliged to put the customer on another airline. Their view was that their obligation in law was limited to them transporting the customer on their next available flight, or to give the passenger a full refund. They said that no other industry was compelled to give their customers to their competitors or to buy a competing product, in similar circumstances.
The network airlines were more flexible and envisioned that under certain circumstances the passenger might be rerouted wholly or partially on another airline. What we ended up with is a article that neither requires it or bans it.
This leaves it to the courts to decide.
From VS perspective they believe they have complied with the Regulation as they have offered you a reroute to their next (or previous) available flight (i.e. their earliest opportunity) or a full refund. Their offer of an alternate destination is over and above the requirements of the regulation. It is relevant to point out that the regulation does not define 'earliest opportunity', but other articles of the regulation stipulate fixed times that the airlines must comply with.
I realise that none of this helps you in your particular situation, it is just an attempt to explain why VS may have decided to do what they have done. (Also please note that these are not my views, I'm just guessing what VS's views are)
You hadn't mention previously that you had booked this through a travel agency. If you booked the hotel and flights together I believe that you have additional protections under the EU's Package Travel Directive. (Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours.) The first thing I would do would be to get in touch with the travel agent and to tell them they must sort out the problem. Either they must give you a full refund (hotel, flight and anything else) or to get you to LAS as you originally booked.