I don't think there's anything wrong with the kids knowing BOTH of their parents' flaws (told in an age-appropriate way, of course), and also how their parents have dealt/are dealing with them.
But I don't like the threat. I would tell her "Please don't use childish threats when dealing with something as important as our children. If you'd like to tell them the truth, I have no problem with that. I'm perfectly willing to own up to my own sins and flaws, and I will also let them know what I've done, and am doing, to try to deal with them."
