If I can be very honest, I don't think she can take care of D7 alone. I don't think she can afford the payments on the house alone either.
So what do i do? Do I let her off easy (ie. take less money) or do I stand my ground and stick to my number. If she can't afford the payments then we sell...end of story.

One more comment if I may. She keeps saying that if in 6 - 8 -12 months she realizes that she made a mistake then we will still have the house. Another one is if I realize that I can't make the payments, I'll sell the house (shouldn't she know this before hand?) This is the type of stuff I am living with day in day out.

Maybe I am the one who is out in left field, but I am sticking to my number. if she can't afford it so be it. D7 will already be disrupted with the separation...she will deal with a new home. It is not my decision to not try to work this out...she decided to go down this road and she needs to realize the consequences. I'll probably soften my position. One last thing she wants custody of D7 with me being able to pick her up anytime.