I wont go on top. It's a body image problem and also very physically straining and near impossible for me to manage it. Even the thought of it makes me shudder. My man would love it if I did go on top, and we tried it not so long ago, but it just ended in tears! (really!)
It could be a body image problem with your wife, but it sounds like there is more to it than that. Some people (men included) hate to masturbate in front of another person, and it is actually quite common. I used to be like that as well, but I'm much better than I was.
Having a violent reaction tells me that it is likely that your wife is highly against it, but she isn't really sure why, and instead of just saying "no" she is flipping out because she is somewhat frustrated with herself at not being able to do something. It may feel alien and wrong to her, but she may not be able to give any reason except that her head tells her no.
But it is also possible that it is down to a post-trauma, perhaps with an ex boyfriend or something deeply rooted in her psych? eg. being caught masturbating at 14 or something?
Self body image isn't the only reason for someone to have problems in the bedroom. Masturbation is a highly private and personal thing. I'd probably say that is about equal in popularity of reasons as self image for being unable to perform mutual masturbation.
I think perhaps you should talk to her, ask her if everything is alright. If she wants to talk about it or is able to talk about it, she probably will, in her own time. But let her know that you are there for her if she needs to talk about anything. It may be very obvious that you are there to talk to and you wife should feel comfortable about talking to you about anything, but just saying it will confirm it and will rest in her mind until she is ready to talk.
Though, I think you are right that you shouldn't try to bring up masturbation again for a while, it is obviously something very sensative for her, (more so than most) even if she isn't really sure why.
Try to find other ways to open her up in the bedroom. Asking her to talk dirty might help things along a bit, or ask her to press her breasts or genatalia on your body. It's can be a big thing to ask a woman, but if she obliges then it may help to boost her bedroom confidence and self image (if it is a self image problem.)
If thats a no-go as well then it is likely it is a self image problem.
You could try to entice her by inviting her to do anything she wishes to your body (sexually, of course) or use the technique my partner used on me - I'd ask what he'd want in the heat of the moment and he'd say "I don't know... What do you want to do?" The obvious reaction being "I don't know" to which he would respond, "well, if you don't tell me soon, then I'm going to stop." and in the middle of everything I clearly don't want him to stop. Even if I just vocally said that I wanted him to carry on what he was doing, that would be enough. Just to get me to open up a bit to him about my desires and sexual needs etc. It might work with you.
Anyway. Good luck and keep us posted on how you get on.