I can't speak to the co-sleeping side of things, but I can definitely speak to my experience with having 2 children who had constant night-wakings. My first son never slept well until I weaned him at 15 mths. Within 2 weeks he was sleeping through the night (finally!!). My 2nd son (now 7.5 mths) is showing no signs of stopping the night wakings on his own, but I have no desire to wean him from breastfeeding altogether just yet.
However, I do believe everyone has a threshold when it comes to sleep & sanity. Some families do perfectly fine when it comes to their babies being up all night, regardless of the reasons. But I've come to believe it's not healthy for mom OR baby to continue on with a habit that does neither of you any good - that being a "human paci" as you've described.
I am an advocate for SOME crying with babies. Some mothers aren't - perfectly fine. But for any kind of habit-breaking, there will be a little "pain" experienced by both sides & that was the only way I've been able to break habits with my boys until they could communicate a little better.
We're currently still sleep-training the 2nd boy & really the first 2 nights were the longest / most difficult. Since then it has gradually been easier & easier on everyone. But he sleeps in a crib in the same room as his brother, not our bed. I honestly don't know that it's possible to keep a child next to you - who can smell you, sense you, etc. - and expect them to somehow NOT want to nurse, no matter what you tried. But maybe there's something out there in co-sleeping books that you could read up on?
We use the "fade" method with our son; my first goal was to cut down to 1 feeding in the overnight hours rather than the 3-5 we were doing each night. I wanted to feed him between 11 & Midnight & then again around 5am. If he woke earlier than that, then I would not pick him up & would go in every 5 to 7 minutes to reposition, rub his cheek & remind him it was "night night". If he woke after the Midnight feeding, same thing.
Last night he slept 7:00 to 2:30 - I decided to let him cry, with me visiting him of course. After about 30 minutes he got the hint & I didn't hear from him until closer to the 5:00 hour. I fed him, then he slept until 7:30. Woo hoo!! Progress. :)
All habits take time to break, so do some research for your particular situation, create a plan & both you & hubbs stick to it for a good 2 weeks. I guarantee you will see results much sooner than you think & both your sanity, health & baby's health will be all the better for it!
Good luck!!