Bx,
We are having a similar situation here atm, but the opposite role plays DH is the dragon and I am the softy. He frustrates me soooo much but I know deep down that picking battles that need to be inforced is important. I think you are doing a great job anyone that has a toddler deserves a medal of sanity.
I am a big believer of timeout but DD is starting to figure out mummys buttons and sobs...I need a big cuddle whilst in it. MIL and FIL think I am nasty for not giving her one when she requests it...we have cuddles at the end when we talk about what she has done to be placed in time out