FL,

Settling is something we run to because we want our lives back after so much crap. So many of us settle to stop the pain of the whole ordeal. But settling at our expense is not IMHO the right thing to do.

As far as the house your kids grew up in, I wanted the same for mine FL - I truly did, but had to sell the house to my X when he had it appraised for an amount too much above value. I bought a new house and all my fears about the kids turned out to be wrong. For one thing, the old house held really bad memories of their parents' breakup. For another, they like my new house better, they're happy here. Plus, my boys spend their time here - not there.

It's not the house that kids remember. You can fix up a new room for your son. Laws are laws FL. The only way she can get what is not legally hers to have is if you let her.
If you cave now, you may always regret it. You will probably regret it if you don't stand up. How much longer would it drag this thing on anyway?