I agree that setting limits is not only fine, but helpful for all involved. The nursing relationship (with toddlers and beyond) is about balancing the needs of both mother and child, and when a mother starts to feel resentful of nursing, limits or changes should be considered.
I tandem nursed my first two children for almost three years, and found the book, Adventures in Tandem Nursing
, to be very helpful. The memories and pictures I have from those days with my two oldest children are so precious to me! My oldest eventually outgrew nursing on his own. I will cherish every moment, and he still has fond memories of nursing.
Will your little one accept snuggles instead? I am pregnant with baby #4, and my third is the same age as your oldest. I've found that he will nurse for a little while (at nap and bedtime) and then be content to snuggle while he falls asleep. That seems to be working for now. At 2 1/2, most children can understand and communicate enough to work through these challenges. I found for me, that I needed to be able to say "no" when I really wasn't up to nursing, but did not yet feel ready to wean.
Congratulations on tandem nursing! And, your new sweet baby. : )