Don
Yes, if you accept travel on the flight then you have used your ALT and that's the end of it as per the new policy. However, you do not have to accept the downgrade and can take denied boarding privileges.
Camel,
I can only suggest in future you have a copy of the relevant pages from the STM. It's plainly written now even if it wasn't then.
Turtle
I'd be at TICHs door to get the day back. The company would have lost me the day by not honouring the ALT.