I would have to agree that getting out or making her get out may be the best solution for your children.
Your C was one step shy of calling your wife an unfit mother. Obviously her abusive behavior is something that worries him. That he would want/or feel you need to form a strong barrier between her and your children. Sounds to me if it were not for his code of confidentiality he may be inclined to call Child Welfare on her. And his wanting you to work on your relationship with your children. To me signifies he feels they need to be aware of your support and feel confident that you will protect them.
Let me tell you one thing. As a adult it is terrible to not feel safe in your own home. As a child it is terrifying.
