rog747 - I did say that s/he may not have actually experienced a downgrading, but should use the Regulations provisions as a starting point for negotiations.
How do you think a regulator would interpret being given a seat of a lower 'quality' than the one booked, and promised in writing? I don't know but if I was Thompson I don't think I'd want to find out.
The text of the regulation provides:
2. If an operating air carrier places a passenger in a class lower than that for which the ticket was purchased, it shall within seven days, by the means provided for in Article 7(3), reimburse
(a) 30 % of the price of the ticket for all flights of 1500 kilometres or less, or
(b) 50 % of the price of the ticket for all intra-Community flights of more than 1500 kilometres, except flights between the European territory of the Member States and the French overseas departments, and for all other flights between 1500 and 3500 kilometres, or
(c) 75 % of the price of the ticket for all flights not falling under (a) or (b), including flights between the European territory of the Member States and the French overseas departments.
So, if I was superq7 I would say to Thompson, "You know Regulation 261/2004 requires you to reimburse me 75% of the price of the ticket but seeing as I'm such a nice guy I'll accept the better seat surcharge as a credit towards future travel." If they refused to consider my reasonable claim I'd get the CAA involved.