I just wanted to stop by to offer my support- I am another one with a live in MLCer. It is a really tough thing having to interact more and share space and some days I think it would be easier for my H to live somewhere else. HOWEVER, I do believe it does have its advantages - they do still maintain some kind of interaction even if it isn't much, they see the kids most likely more than they would if they were out, etc.
Try your best to ignore and detach from the craziness. Live your life and let her spin. Focus on the kids. Try to make their life as stable and "normal"as you can (sounds like you already have a good handle on it) for them. Be their rock. They will help keep you grounded and focused on what is important. For me, the deeper bond and greater appreciation I have developed for my kids through this is something I am grateful for every day.
Hang in there and keep us posted. You have lots of support here.