Sorry to hear this is happening. What a terrible situation.
So basically, your W is choosing to drink, go out, sleep with other men, treat you like garbage, and neglect her kids. Not only that, but she tells you she's going to continue doing those things.
Sorry for this 2x4, but you need to find your balls. Not only for you, but for your children. Do you really want your kids seeing this kind of behavior?
I'm so sick of seeing this crap from women, especially mothers. Her going out, getting drunk, and doing God knows what (or who) while you sit home taking care of the kids is probably the most selfish pathetic thing a person can do.
This certainly isn't what you want to hear, and it's just my opinion. But if I were you I would document everything that is happening and has happened. Keep a log or journal of how much time you spend with the kids, how often she goes out 'partying', all of the drunken fights she starts, if/how it effects the kids, etc.
Buy a digital recorder and make sure it's running during any interactions with her. Especially during her drunken tirades. All she needs to do is call 911 and say she feels threatened, and you're out of the house w/ a TRO against you, will have no contact with your kids, etc.
You said she's a SAHM. How's she getting the money to go out raging? Cut that money source off. All that money that she spends going out, put in an account for yourself. Hell, hide it under a mattress or in the backyard.
Talk to a lawyer. Talk to several lawyers. Find one that is willing to fight for full custody.
Make no mention of Divorce to your wife, ever again. She's already called your bluff on that. Get your ducks in a row and file. Go for full custody. In my opinion, that's the only thing that may snap her out of this.
I've had a lawyer since around 6 months ago - before I knew about the A I had already decided I would not stick around while W partied like a college student. Meeting with the attorney was about understanding what my life would look like post D, and what I needed to prepare for if that becomes reality.
I won't rant on and on about how neglectful she's been of her parenting responsibilities because frankly, I have moved beyond the anger stage. Suffice to say it has been 2 years of deep frustration and I'm now focused on the last ditch effort phase.
I've read here that filing for D in order to save the MR is a risky move and I wouldn't file until I am well and truly ready to end it. I'd say I'm 80% there.