I was laid off and given nothing in writing explaining my options. Was told I could work 2 more weeks IF I wanted to, if not that was fine and I'd qualify for unemployment for 26 weeks.

I chose not to work the remaining 2 weeks. During my exit interview I mentioned that I had remaining vacation time that I'd earned that I'd like to be paid for, got no objections from my boss and was told OK. Also asked for 2 weeks paid severence package and was declined on that.

Received my last paycheck with my remaining vacation pay cut off of it. Now my employer is claiming that I quit, gave them no transition time and saying according to the employee manual I loose my accrued vacation time. In reality I didn't quit and they know it - I was given the option to work 2 more weeks or not to. There is nothing in our employee manual about the situation of a layoff.

I highly doubt that I'll be called back to work there, this is a very small family owned business that is sinking fast.

Is my employer required by law to pay me for my remaining vacation time?

Michigan law requires that you be paid for unused vacation IF there is a company policy of doing so. If no such policy exists, they are not required to pay it.