Oh girl, I feel your pain! My son is now 4 1/2 mos old, and I can honestly say that this child is far needier than my first.
My son is a mama's boy, and for the first two months of his life if he wasn't on the booby he was wailing. So, at his 2 week appointment his regular pediatrician was out of town, and we saw who ever was available. She walked in the room, looked at me and said "Wow, you look really tired, I'm guessing he isn't sleeping." Umm, thanks? So, after hating her for the first five or so minutes that she was in the room she actually offered up some real life advice. She said to pump a little bit after each feeding, try to get 4 or so ounces, and have his dad give him a bottle of breast milk at whatever you expect his last feeding of the night to be. Thank goodness this worked for me, at least for a few hours. I still spent a good amount of time at night with one breast out, but, at least I was getting some sleep, and, with the bottle I was able to get four un-interrupted hours of blessed sleep (he eats every two hours, even now.)
As for feeling like you are cheating the big boy out of mommy time I can also attest to this. I felt like every time my daughter walked down the stairs there mommy was with Cam on her booby. At one point she even started sitting next to me and "breast feeding" one of her dolls. My mom chimed in with some valuable advice, and said to have a stack of books next to you wherever you nurse (I chose the couch), and while you are feeding the baby have big sissy in my case, read to the baby and you. Since your big boy is still pretty young, try having him hold the book and you say the words. You definitely can't feel guilty reading to the kids! Then, if daddy is home, leave the baby with him for 20 or so minutes and take big brother to the park, on a walk, out back, or my personal fav, Starbucks, just anything that gives you two alone time. :)
This was definitely not easy though. No matter what I did I always seemed to be stuck in a guilt trap. I felt guilty for not paying enough attention to Reese because I was feeding Cam so much, then when I would not pay attention to Cam to play with Reese I felt guilty, and time to myself? Oh man, I felt like the police were looking for me! Don't feel guilty, you'll be a pro at this two kid thing in no time, actually, probably around the time you are getting ready for baby number 3 :S....
I feel like I have completely ignored your original question, oh the binky. My son hated it, and he REALLY wanted his thumb. Not working for me. In my head I decided that you can always take away a binky, but you might get arrested for lobbing your sons thumb off. So, in the interest of paying for fewer years of braces in the coming years, I have elected the binky. Reese (the older one) was born loving the binky, her and avent were best friends, and mam as she got older. But then there was Cam, who absolutely refused anything but a booby. I got fed up one day and headed to Babies R Us (eww, its all about diapers.com now!) and literally bought every brand and style of pacifier they had. So, $100 and 20 styles of pacifiers later we finally found one that worked! :) Originally it was the Natursutten that he would take, but of course they are incredibly expensive, and only come in a 1 pack. So, I was able to get him to switch to the avent. Even now he still isn't loving it, but I can put it in his mouth and tap the center gently and quickly and he will take it.
Eventually I had to wean down the breast feeding to only morning and night because I couldn't handle the guilt. In my experience feeding a baby every two hours isn't feasible when you have an older one. Good luck, and hopefully this novel that I have offered up has a little bit of usable advice!