I really feel for you man. I am in the same position, not that I wanted to let W stay in the house with the kids, but I was hoping that I might be able to. Not enough equity for either of us to buy the other out and refi, plus, the payments are too high for it to make sense. We will likely both be renting too. Although I will be renting a house. I don't know what W is going to do.
Good luck man. This all makes me sick. All you can do is the best you can do. I know that you will do fine for you and your kids.