It is time to drop the rope, I personally would not agree to any kind of living arrangement, I would say that it would not work because I would want to move on with my life and that is starting a new life for me without you. Being in the same house, eventhough you would not be in it at the same time does not allow me to do that. We will have to get two seperate places. I hope the children will understand that we will do the very best we can for them.
When my wife asked how would it be better for the children if we did not live side by side, I always reminded her that the best thing would be to have one house with two happily married parents is the best and that is what I wanted to work on. I found it so ironic when she wanted what is best for the boys and then in the same breath wanted to destroy what was their life is as they knew it. When they are being unrealistic, mentioning the children's well being really slapped her with some reality.
Again, I only did this once, as once is all it takes to tell her how you feel about the whole thing. Then I went into heavy DB'ing.