IMO, it's time to make lemonade out of lemons. By 8 am you need to have some idea of what you consider to be the best solution to the problem. (And unfortunately, demanding the original 2B villa may not be realistic. Have something else in mind.) Ask them to put you up in two or three connecting hotel rooms at the Beach Club. If you had planned on cooking in the room, ask for concierge access, or for a suite at one of the hotels that will accommodate your party size. DVC can't make a villa suddenly materialize...but they can foot the bill for more expensive hotel rooms to cover for their mistake. When you speak to them in the morning, I would just start out with "our family discussed it last night and have a solution to propose." Offer one or two different suggestions similar to the above and dare them to turn you down.
You could also go onto the Disney World reservation website now and see if any Two Bedroom villas are showing up for cash reservations on your dates. DVC rooms are rightfully made available to cash guests on a regular basis. But if there are any unbooked rooms as of tomorrow morning, just flat out tell DVC do "get them back." IMO, worst thing you can do is go into the call blindly and just wait for DVC to offer suggestions. You probably won't be 100% satisfied with their suggestions, and you'll be scrambling to decide how to react. Use the next few hours to decide what you believe to be an acceptable compromise, and see if they'll bite.