I then shut the bedroom door and we argued for another 30 minutes. My home is a dysfunctional mess. I think it is time to move out.
OMG - You are absolutely right it is a dysfunctional mess and obviously your wife has little to no concern for the emotional well being of your kids. She sounds very narcissitic. I am sorry you (and more so your kids) are going through this. I do think that you have their best intentions at heart, but I personally think you and your wife have both involved them too much in this whole mess. I kind of cringe thinking about the pain and suffering they are experiencing. Hopefully you have them in regular counseling so that they have an impartial adult they can vent to.
I think the both of you continuing to live under the same roof and having these types of interactions in front of your kids is a very bad idea. Not sure what the solution is, but as Dr. Phil says "how is this working for you?" Something needs to change.