I agree with wonky - have your toddler in a different part of the bed, and I agree that next to your dp on the outside edge is the best way. If you are feeding in the night you will probably want to have the baby on either side of you at some point, and will probably fall asleep that way.
The advice about safety is spot on - no drinking, smoking, medication, etc for either parent. Also not ok if either of you are obese.
Your mother is probably going to worry whatever you do, if she thinks it's weird, but you could explain that breastfeeding mothers are almost uncannily aware of where their babies are in the bed and the pair will wake, sleep, breathe, turn and roll together in synchrony. (I presume you are intending breastfeeding? sorry if have assumed wrongly)
the other thing dp and I did (I was worried about the baby getting squished under the duvet) was to put our pillows about a foot down the bed (this doesn't work if you are very tall, I would guess) and put the baby up in between us at the top of the bed, so we couldn't physically roll or smother him.
The other thing you could do is point out that the "imagine how you'd feel" attitude would stop us from doing many interesting things in life. Going in a car, letting our children play on slides etc, flying abroad on holiday, being a pedestrian next to a road - these are all things that could and have eneded in disaster. However as adults we weigh up the risks and make choices that we believe keep us safe enough.