My only real option at this time, given I don't have anything already lined up, is to accept the demotion and keep looking. Like they say, it's easier to get a job if you already have one.
The part that worries me is that they even offered me the alternative of resigning. Makes it sound like they don't care if I stay or go. On the other hand they have been known to fire people outright when their jobs became expendable, but they offered to keep me on even in a demoted role (this is not precedented with them, as far as I recall).
It sounds like you are making a good decision. I always say that too, they say it is easier to find a job when you already have one. I think b/c they probably wonder why you don't have a job and some people probably feel less confident if they don't have a job, and I think it is always better to go in with confidence of course.
It sounds like they really like you there as they gave you a choice to what you prefer instead of firing you. It does sound like a good thing to me they did that; I agree with lwb! Is there any chance after the demotion that they would promote you back after a while?
