She was pissed that i took such a rigid stance on this and actually moved into the spare room last night which I guess she thinks punishes me.
She counts my behavior in this matter as controlling and has said the same. Maybe but I think it is important to protect the kids from any blame here as it will be difficult enough on them.
See what you did there? You went by "What is THE RIGHT THING TO DO" instead of by what your wife might see as "controlling" or whatever.
You ABSOLUTELY continue to stand up and do what's right by those kids. It is UNCONSCIONABLE what she's doing here! And do NOT let her inform them by herself; make sure you are there too, and correct anything that needs correcting. If she does it anyway, then make sure you circle back with each of them, answer any of their questions honestly, and reassure them both.
"What is best for my kids is best for me"
Persevere = happily being patient over a long period of time