I agree with much of what you said, Joanne...with one MAJOR exception:
"I think you should ignore her AND YOUR KIDS TOO and see how crazy she gets..."
If this wife/mother is as unstable and unhealthy as it sounds...these kids need all the love and support they can get! Children should never be collateral damage in the battles of a marriage!!! Growing up with a crazy mother is bad enough...they don't need to be abandoned by the more stable, healthy and sensible parent in this family. That's a surefire way of creating the next generation of crazy, attention-seeking spoiled brats!!!
If you are in an unhealthy situation...and the other person choses to stay insane...GET OUT!...AND TAKE YOUR KIDS WITH YOU!!!
And if your new relationship means this much to you...don't subject it to the craziness that will ensue as long as you are still in your marriage!
You ALL deserve to be healthy and happy...and if your wife wants to remain miserable THAT IS A CHOICE THAT SHE CAN LIVE WITH ALONE!
*It is even possible that by leaving this situation your wife just might finally wake up and turn her life around! (Perhaps...but unfortunately I doubt it!!!)