I just don't get her falling apart when she thought you were moving out. I know you said she still wanted to be friends, but really? She needs to get real.
Have you thought about telling her that arrangement doesn't work for you?
I can't speak for all women, but I think when most say they want to remain friends....it's just a way of trying to slide out of the R without any protest from the man. Did you ever have a girl breakup with you in high school and say she hoped you two could stay friends? Same thing happening here.
So tell me, why does she think she can have her cake and eat it too?
It is not about what you feel should work in your M. It is about doing the work that gets the right results. Do what works!