Hey, since MC and his W are separated, I'm not sure if he is responsible for the child. But as Still said a lawyer would best answer this.
MC, YES!! Have her tell the kids. Have her feel the shame of telling them. It won't be easy for her to do and why should she get the easy way out. You can then comfort them after she has this shameful conversation. I would hate to have to have such a convo with my kids if I had kids. My opinion. All of this is her bottom so don't put a cushion for when she crash.