I wouldn't put her on the duvet, push the duvet down so it only comes up to your waist and isn't near her. You can always share a cotton blanket with her if you are too cold on your top half.
Most mums instinctively sleep in a "C" shape curled around their baby with a leg stopping them from wriggling down and an arm stopping them from wriggling up.
Your boobs are extremely unlikely to smother her, even if they are big. DS used to use one of mine as a pillow
I did used to get paranoid that he would get caught up in my pyjamas though so used to sleep with either a fully open top or no top at all. As DS got bigger I worried less about this.
You do get stiff, but as the baby gets bigger you relax more. I found the worst thing was sleeping on my side all night - it's not natural for me, I move around a lot usually. When DS was in with me I was still all night.
Is it possible to convert your crib, or cot/cotbed if you have one already, into a three sided one and push it up against your bed? This is the most practical solution IMO because it gives you more space and if you do want to change sleeping position you can make sure the baby is well within the confines of the cot sides.
I found DS was easily warm enough in a vest and babygrow, in the summer sometimes only one or even neither, and if he did get cold I layered blankets on him. I used to check him almost in my sleep and adjust his covering depending on whether he was hot or cold - difficult to do in a sleeping bag.
The author of Three In A Bed advises not swaddling if you co sleep as it can impair instincts in even the youngest baby to react to danger, ie any kind of obstruction.