First up - it can be easy for us to make assumptions about a post that someone has made - and people react emotionally as to how we all would react in that situation...or from our own experiences etc...
Secondly, this is sad. It is very sad when things like this happen. Hearts break.
So, it sounds as tho talking with your wife is a good thing and that you have got things under control as best you can in this situation.
Your posting 'sounds' to me as tho you are keeping a lid on your emotions right now, that you maybe quite detached so that you can keep your composure. This isn't a bad thing - and of course I could be interpreting your writing completely wrongly.
Personally, I find nothing wrong with your staying in the house and having joint custody of the children. I have seen this from both sides... I remained in the house when my ex and I separated ... my brother remained in his house when he and his ex separated.
My brother retained joint custody - which can be quite a rare arrangement these days - for the last 8 years his boy lives with his Mom half a week and my brother half a week - strangely, contrary to what we thought may happen at the start, his son has coped with this incredibly well and is a very well adjusted child. So it can work.
I would advise you to try and keep the children's lives as 'normal' as possible and if they will be staying with their grandfather whilst with their mother, and that is a safe and comfortable relationship for them, then hopefully the children will do well.
I'd also advise, even tho you're not asking for this advice, but... do talk to your friends and family when you can to release some of the emotion that must be building up inside you. I understand it must be awfully hard, especially at this time of year - do try and talk to someone when you can so that you not only keep your composure around the children, but can let off some steam with others (I imagine, or feel from your writing, that there is a lot of anger there which is wholly understandable), as and when you can.
The children are obviously important in all this... but so are you. You and your wife managing to hold it all together around them is a priority, but your well-being must be a priority too - if you haven't got a good wellbeing then you will not be able to cope with single parenthood or the upset of moving house, divorce etc etc etc.
Talk if you wish - I'm wishing you best wishes for the future and a hope that 2011 will be a better year for you.