Yes, this is a wonky system. You are right that the weekly rate does override, so it's really best utilized in a listing where it's unlikely you'll do special event pricing. I would decline the guest with an explanation, offer him a reduction, and if he books great. He probably won't, but that's too bad but you will at least have your pricing reflect what you want for your listing on those dates.
Now that you've reminded me of this, I am going to double check that I don't have weekly pricing on my listings for next New Years Eve!
Maybe there is a way to override weekly pricing on certain calendar days, but I've never seen that setting. Anyone else have any input on this?