Thank you for your replies everyone! I feel better now it sounds like I'm on the right track. Currently he ends up sleeping halfway between on his side and on his back, wedged in the crook of my arm with the back of his head resting in my elbow and his face laying either on my belly or on my breast. I have him dressed in a diaper and take off my pajama top so that he can be warm from my skin and then cover us both with a receiving blanket. I wake up often just to glance down and see that his face is open and unobstructed (that doesn't seem to make me tired) Sometimes he falls asleep on the nipple (when I'm on my side) but I usually stay awake until I make sure he's not sinking under the boob.
When he gets hungry he nuzzles me awake and I help him latch, but he doesn't seem to be bothered by his diaper and usually goes without changing for about 7 hours and the diaper is usually pretty empty in the morning. He does most of his pooping during the day. I definitely get a lot more sleep that way as I don't have to get up.
Our bed is a memoryfoam mattress, so it's moderately soft, I haven't put a safety rail up yet, but I think we'll end up pushing the crib to the bed anyways so it'll act as a safety guard on that side. So far he's pretty much not going anywhere further than my elbow.
I love having him next to me like that. Especially when I glance down in the middle of the night and see that sweet sleeping face on my belly...

