It is very confusing based on what you said.
First, is there any contract, written or oral? If so, what does the contract say?
Second, when did you notify the director that you were going on a vacation? Before the agreement or after?
Third, when you did not send your kid because of his sickness, did you notify the daycare center?
Four, how much did you pay for the two weeks and huch is the weekly rate?
Five, how much security deposit was supposed to be?
Parol evidence rule does not apply to contract modification and interpretation.
You are right on one thing: the security deposit has to be in a separate account.