I haven't read all the way through this thread as it has become fairly long, but after reading the OP and several below, I'd just like to add my opinion.
We co-slept with each of our 3 children.
DD1 co-slept until she was about 20 months.
DS arrived when DD1 was 2 years old, by which time she was happy in her own bed.
DS then co-slept until he was approximately 8 months, and was then moved in to the same room as DD1.
DD2 arrived when DS was 2 years old and DD1 was 4 years. (by which time both DD1 and DS were happy in their own room)
DD1 co-slept until she was 11 months.
All 3 of the children were co-sleeping until they stopped breast feeding.
(DD1 was 19 months when she stopped, DS was 7 months and DD1 was 11 months)
Both DH and I found co-sleeping to be by far the most comfortable, natural and convenient choice for us.
My only difference to your arrangement, was that I had a cot pushed up to the bed, at the same level as ours, rather than on to a wall. The cot was there to provide extra space should we need it.
Baby was never in the middle of us, as DH has a tendancy to roam!
They were next to me on the outside.
Sometimes I would move them over into the cot, to allow them and me to stretch out, sometimes they would fall asleep and stay right next to me.
Cover wise, when they were very small I slept under a blanket/throw while DH had the majority of the duvet and they had their own blanket.
Personally I think it depends on the individuals. Only you know yourself and your baby. If you are a heavy sleeper, then I would consider the cot next to the bed option too.
I am a very light sleeper and don't tend to move about too much. All 3 of my babies woke every 1 and a half to 2 hours for a feed until they were fairly old. It was definately easier than getting up to feed them. It was less disruptive for the entire family.
I have no regrets co-sleeping with any of my children. It was a very happy and relaxed time and I look back on the cuddles and feeds and closeness with much happiness.
My babies didn't wake screaming for feeds, they would stir and I'd automatically wake before they had to wait too long.
i also felt safer, as I knew straight away if they were cold/hot/breathing properly or upset for any reason.
I also didn't have any trouble making the transition from our bed to their own bed either...luckily. I do feel that that had a lot to do with the security they felt at night time and that they related sleep to a calm and content time. I now have a 3, 5 and 7 year old who all sleep in their own beds and are happy to do so. (although we do ocassionally have the odd visitor!)
As I say though, it is completely a personal choice, so you need to think about whether it will suit your family and your life.
For my dh and I, we felt it the most natural and comfortable thing to do. I just simply wanted my babies near me and I felt happier for doing so.