An interesting question.
After a review of the relevant timeline and events, the answer I would give is that no such peace proposal could have been successful in earnest. Both the November and December proposals represent (as diplomacy often does) a recognition of Japan’s goals without forcing Japan to fight for them. This rubicon had already been crossed, and the 1st mediation was proposed the same day as Japan landed significant reinforcements in the face of increasing opposition and losses, a tremendous escalation of the conflict that does not square with an immanent ceasefire
Even if we ignore the other provocations that led to the 2nd S-J war, we probably have to accept that no legitimate and mandated government of China could come to an unequal peace without being collapsing, and that after several centuries of national crisis, that China could not accept a status-quo détente, that would be tantamount to national surrender and destruction by the slow, creeping constriction method rather than the not that much faster method of outright war, in which China was actually doing surprisingly well.
We also can’t be sure that Japan would have been all that satisfied by the terms; while it solidified their 1930s era-goals, it did not entertain the possibility of Japan dominating all of China and therefore the surrounding areas and becoming a real empire. Khalkin Gol demonstrates, the Japanese were not ready to project continental power or support armies across vast seas and lands.
As armchair generals, we might ask why Japan would not cynically but pragmatically accept that a limited victory in China would give them the flexibility to look elsewhere a few years later, but the answer here I believe is that Japan (like Germany) did not have enough strategic focus or any sufficiently clear plan to begin or end wars by winning them in order and one at a time. So, having escalated things so dramatically in China, leading to a gigantic ongoing boondoggle, Japan made the classic Napoleonic/roman error of deciding that that was the perfect time to attack its other, much stronger Imperial enemies. Brilliant.
Accepting your hypothetical, a ceasefire and negotiated solution would be tenuous. “Sino-Japanese buildup in western China and Manchuria along USSR’s border be to disallow full USSR deployment against Euro-Axis?” It sound like you are proposing a transition directly from enemies to friends.
Look at these statements from the wik;
“At the start of 1938, the leadership in Tokyo still hoped to limit the scope of the conflict to occupy areas around Shanghai, Nanjing and most of northern China. They thought this would preserve strength for an anticipated showdown with the Soviet Union, but by now the Japanese government and GHQ had effectively lost control of the Japanese army in Chinaâ€
Which goes to what Marc is saying; the Army was an independent part of the junta, pursuing its own strategic aims, which accounts for the incoherence of the planning…
And on the other side:
“He (Chang Kaishek) had lost a substantial portion of his best trained and equipped troops in the Battle of Shanghai and was at times at the mercy of his generals, who maintained a high degree of autonomy from the central KMT government.â€
And;
“The Japanese captured Wuhan on October 27, 1938, forcing the KMT to retreat to Chongqing (Chungking), but Chiang Kai-shek still refused to negotiate, saying he would only consider talks if Japan agreed to withdraw to the pre-1937 borders.â€
Which is to say, after another year of mixed results, much fighting and chaos, CKS and GMD considered their position to be better than the November Case #1 of the proposed peace.
Which demonstrates how difficult such an alliance would be to make coherent for both sides. A ceasefire may have emerged from your hypothetical, but what is missing is that 1) China was fighting for survival 2) any capitulation or negotiated solution would likely lead to the devolution of the Kuomintang status quo 3) the Japanese was not content with what it could achieve by diplomacy – the maintenance of the 1935 status quo, and wanted more, but 4) China was not as weak as they presumed and Japan not as strong…at least as far as winning a fast, mobility/logistics war.