I haven't read all the way through this thread yet. I just wanted to reply to these two sentences specifically.
I was very confused when I read this. When you contacted Disney and your Travel Agent, did you say that you want to add more people to your reservation? Or did you say that you wanted to "adjust the occupancy"?
When I hear "adjust the occupancy," in my head, I think of changing the number of people who are legally allowed to be in the room. Some DVC rooms will have one occupancy for cash reservations and a different occupancy for DVC reservations. People booking on DVC points are allowed to have one more person in the room than people booking on cash. So someone who has a cash reservation with the maximum number of people on it for one of those rooms, and who wants to add one more person (because that would be allowed if the same room were booked using DVC points) might want to try to get Disney to "adjust the occupancy."
So if I were working for Disney and you told me that you wanted to "adjust the occupancy," I would think - nope, can't do it. The occupancy (meaning number of people who are allowed in the room) is fixed. If the occupancy for the room you booked won't work for you any more, then I guess cancelling your reservation is the way to go.
Now in your situation, I believe the room has enough sleeping spaces for 5, so my guess is that it has a legal occupancy of 5, which is what you want.
And if I were working for Disney I should have checked with you before cancelling your reservation.
But anyway, that's my two cents about this particular situation.