Hydrolysis of epoxide There are two possibilities:


Oxonium ion formation
Cleaving of epoxide


Firstly, I don't know if epoxide is more reactive than carbonyl group.
If epoxide reacts with the proton,


But the given answer is:



In the above mechanism, an unstable carbocation is formed because its near a carbonyl group which is electron withdrawing:
I would go with your approach but your final product is unstable due to high repulsion's by $\pi$ electrons.  



Hence your final product will react further to form a more thermodynamically feasible product.



NOTES:
In second structure two anti-periplanar migrations are possible and the one which leads to the more stable carbonation is favored (or consider the better migrating group based on electronegativity). Third structure rotates about spiral carbon due to repulsion's.