It shouldn't be marked wrong. Sometimes Duoingo seems to be geared toward Americans, while at other times, they appear to be directed toward Britts, Aussies and etc. So you are correct, but should you ever go on holiday to the States, be prepared to expect a great vacation! :)
The audio clearly says "FUERON" instead of "FUIMOS". This has not yet been fixed, as of Sept. 23, 2018. And this is not the only sentence on Duolingo that has this specific mistake: the audio saying "FUERON" while the written word is "FUIMOS". I'm reporting this once again.
I think that to be marked correct by Duo, it is always best to stick quite closely to the original, and maybe your sentence is 'a paraphrase too far'
The Spanish translation of your English sentence would be:
'Nosotros fuimos a México para vacaciones.'
I think the important thing is that neither "de" nor "a" can be translated as "for", and no "para" is in the Spanish sentence presented.
So, the meaning conveyed is the same, but the words used are different.
because in the Spanish sentence the verb is "Fuimos" (we are going), whereas in your sentence that verb is completely absent and has been replaced by a completely different verb "vacationing", so you've basically come up with a different sentence which means the same thing rather than translating the sentence that's actually there.
"Lower class word arrangement" and "much more refined and proper" is in the eye of the beholder. I personally disagree with those statements. But that is the questions of preference and opinion so you are entitled to yours, just as I am entitled to mine.
Now to weightier matters: "We vacationed to Mexico". It seems that 'to' is a typo. Am I right?
Finally (and, arguably, most importantly in the context of learning language) we are learning the preterite form of 'ir', so it is a good idea to use that.