I am not laywer, but would like to say few things here.
You said: "I have not contacted any lawyer yet, as she may take U turn any time". Did you mean not contacted her lawyer ? You should have your own laywer for litigating 498A, unless you are too knowledgeable in IPC.
I personally would advise to contest it and not go for compromise, but for speedy trial and finish it off. Then everything will be in your favor. You can file counter cases, you can get divorce easily as false 498A is cruelty, you can dictate the terms of quash as well of MCD.
The fact that your wife insisting for quash is clear sign that she does not want to let it reach judgement. This is exactly what happens in 498A, the purpose is to bend the husband by the harrassment which happens in initial stage of 498A. Once you are past that stage, why would you even listen to her terms ?
Even if you agree to quash and dont want to continue, it's better to first gauge her level of desparateness and accordingly lay your terms of MCD. Of course if and when you agree there will be clearly specified terms that she will withdraw all cases, and will not file any in future. You should ask to remove the clause "husband agreed to live with me"
Do you know that 498A is non-compoundable ? If you are okay living with it and no more fear of conviction in future, wife cannot withdraw from it without your consent, she is also stuck for good and has to helplessly wait for the inevitable defeat.
Best thing is, get advice from some lawyer. Terms agreed in mediation completely depends on what both party consent together. Its all about what thigs you both agree. It sounds you are just considering her terms you have not specified your terms. The terms that she wont file any case again, or will withdraw all cases, should come from you as part of the mutual agreement. This is why you should take help of a lawyer.