The difficulty with any strategy that relies upon New England is that you don't just need to change America's preparations for the war, you need to change the entire country's attitude toward the conflict. The New England states were loudly and stridently opposed to war, which is one of the reasons that Dearborn had such difficulty finding volunteers in Boston as the preparations for war began. Throughout the conflict, New Englanders preferred to continue trading with the British rather than fight them, and early on did their best to pretend the war wasn't happening at all. There are also huge hurdles toward improving the professionalism of the militias, and with the reliability of the militias period.
The US in 1812 was not the military nation it would become later. Its people and its politicians were suspicious of standing armies and professional armies. What military tradition they did have largely consisted of frontier skirmishes with Indigenous groups and remembered glories of the revolution.
Militia service was greatly preferred to joining the regular army, the officers were usually politicians in their civilian life and accepted their ranks because they hoped to advance their political careers. Because American militia officers were often elected by their own men, they were politicians first and soldiers second in their army life as well. The officers of the regular army and the militias were jealous of each other and often worked poorly together. Both were plagued by poor leadership, and petty squabbles that led to blunders and disasters like Queenston. Finding competent leaders who were willing to serve wasn't easy, which was why the early campaigns were saddled with the likes of Hull, Dearborn and Eustis. It wasn't so much that America's strategy was flawed... it just required good leadership, skilled organization, and a committed and eager population, and it didn't have any of the three.
As far as your proposed peace terms go, it's worth noting that the British moved to repeal the Orders in Council two days before the Americans declared war, but because of the slow pace of communications at the time, there was no way that the Americans could have learned of it until it was too late. America might have settled for the repeal, the British dismissing some of its Indian agents and changing its policies toward the Indigenous peoples of the west, perhaps some small financial compensation. They had bigger issues to worry about in 1813.
After the humiliation at Detroit, I don't know if the Americans would have been willing to accept a treaty that only gave them what they ostensibly went to war to get. More than any stated goal, the rhetoric of the Americans leading up to the war make's it pretty clear that national pride was a major motivation behind the conflict, and Detroit was a terrible blow to the nation's pride. That said, Detroit could have been prevented, either by a better leader than Hull leading the Americans or by having Brock get the transfer out of North America that he requested before the war.
The result would be a short, small-scale war in which the Americans won a number of victories on land, and a few meaningless but high-profile frigate actions at sea. America's politicians would be able to congratulate themselves on satisfying their country's honour and proving that the US couldn't be pushed around. The British could wash their hands of the whole thing and go back to the war they actually cared about. However, the war wouldn't have been a complete disaster for the British as much as it would have been a complete waste of time. Actually progressing to the point that the war seriously harms Britain's interest or standing is a much more difficult challenge.