My BF and I only have a double bed and we're both overweight so space is pretty limited. Usually after some phone time in bed we'll cuddle for a little bit and then split off to sleep. Once I fall asleep, I tend to not move at all until morning and he doesn't move that much at night either, so we don't have too much problems bumping into each other. Can't speak for him, but I don't really sleep better when by myself since I just stick to the same half of the bed regardless.
As for sleep embracing, every now and then we'll fall asleep like that. On our first date, the post-bone cuddle nap was probably the best sleep I've ever had.