The Ukrainian position is pretty understandable, they have every right to ask for that, and they also have every reason to be wary of any agreements that rely on the integrity of the Kremlin; recent history suggests that Gepetto has been working overtime in Tuscany....
The Russians have a number of options, and most are not desirable.
1. They can escalate;
2. They can continue with the current master plan...;
3. They can conduct a partial withdrawal to 2014 lines;
4. They can conduct a full withdrawal to pre 2014 lines.
As much as I like your analysis and conclusion and would love to see Russia going a rational approach and choosing alternative 4, I have major difficulties seeing this happening.
Irrationality has brought them to where they are and I don't see the slightest sign of rationality suddenly kicking in. And I'm afraid meanwhile the problem is not only Putin any more. He has pushed the population (where a significant part were anyway feeling phantom pains for loss of the Soviet empire) so far in a direction that it will be very difficult to get himself out of the obligation to deliver. Any retreat will be seen as weakness and defeat by the people. Tyrants are typically overthrown when they are weak and compliant and not when they are strong and cruel. So, the better options for Russia are rather not the good options for Putin himself. That's why we will likely continue to see this tragedy for quite some time to come.