Getting rid of MacArthur (somehow) aside, reassuring the Chinese in general would also be a good idea. Strange as it may seem to us today, knowing Korea was a limited war, in 1950 the Chinese seriously thought MacArthur might blast his way over the border, with the US Navy landing vast armies up and down their coast.
In a discussion with several other Party officials shortly after their intervention in Korea Zhou Enlai (then Minister of Foreign Affairs) stated "We are prepared to withdraw, if necessary, from the coastal provinces to the hinterland, and build up the Northwest and the Southwest provinces as bases for a long-drawn-out war." The Chinese seriously feared the American advance was a prelude to a full scale invasion of China to destroy the PRC. Even as they were sending troops into Korea they were evacuating key people and industry from border and coastal areas to the interior. They took this shit seriously.
A good way to signal to China that we didn't intend to attack them would have been halting after taking Pyongyang. The Taedong River forms a nice defensive barrier in the west, and with the sea lift of the US Navy he could have anchored the line at Hungnam or Wonsan in the east. That's still the "narrow" portion of the peninsula - north of there it widens with some nasty mountain ranges between, forcing any advancing force to spread out more and more.
Holding the capital grants a lot of diplomatic clout, and would have been a powerful argument in future re-unification talks, even if the Chinese did temporarily occupy areas to the north.
A defensive line that far south of the Yalu would also have been very difficult for the Chinese to breach. One of the advantages to letting MacArthur come waltzing all the way up to the Chinese border was it simplified their (greatly strained) logistics immensely, while simultaneously complicating MacArthur's own.