Cancelled flight & awful service

I have booked the SpiceJet flight from Lucknow to Hyderabad to travel on 5th March 2014. The booking was done on 25th Dec 2013.
On 28th Feb, I received just a SMS mentioning the flight from Lucknow has been cancelled due to operation reason and ask me call at their call centre to rebook the flight.

When I called, I was given two options
1. Either travel a day before or a day later - I mentioned that it is not possible for me owing to my personal and professional commitments.
2. Take the full refund - I mentioned that I have to travel on 5th Mar 2014 and if I take the refund and book flight from another airlines, who will pay for the difference in fare (which obviously is their responsibily as the flight has been cancelled from their side). To this they mentioned that it is not their responsibility.
3. Take a flight on same day from Varanasi instead of Lucknow - Varanasi is around 287 KM from Lucknow. In order to catch a flight from Varanasi, I have to start at least 8 hrs prior to my flight time apart from spending like 5 thousand rupees in booking a cab.

I have requested them to provide the below option
To book a different flight (indigo or jet) from Lucknow to Delhi and then I board the same flight from Delhi to Hyderabad, which I had already booked. This option has not been agreed upon by them.

Details are
1. PNR - ZBK7TA
2. Date of Travel - 5th March 2014
3. Date of Booking - 25th Dec 2013
4. From - Lucknow
5. To - Hyderabad
6. Flight Details - SG 518/SG 221

Please let me know how to go ahead with this issue.

Thank you.

Regards
Deepankur