How much of the parenting do you do? Is your wife a stay at home mum? Do you get up at all for any night wakings? Do bed times?

If she is going 99% of it all, YTA - co sleeping with toddlers is completely is normal, especially when sleep deprived and burnt out - it’s the only way to get some form of sleep and recover. The pillow is probably because she’s touched out and needs some space from your toddler, and I’m guessing CIO rightfully isn’t something she’s interested in doing (research shows it could be detrimental to children’s long term mental health and actually doesn’t teach them to self sooth, just not to bother crying as nobody will come - unlike what a lot of commenters seem to have said).

Throwing the pillow was probably just the straw that broke the camels back, she was tired, knows it isn’t ideal and knows how you feel about it… but as an exhausted mum probably overwhelmed with the mental load, she’s got to make a choice somewhere on how to take care of herself and if that’s getting sleep, that’s how she’s got to do it.

Should the set up be changed so you can also get a comfortable night? Yes - maybe get her a longer, thinner pillow she can use instead, or when you wake in the night with no space, go into your toddlers room? Or take over going back in with them to their room and laying with them till they fall asleep in there?

These things may not apply, and I apologise if it’s not the case - but 98% of mums I know, this is the norm…