I would not give up visitations to be with the children because of this. If she goes to the Sherrif’s department, she will be sent to the ER to have a medical opinion for the physical abuse charges. Once they find out that there’s a custody dispute she will have a little less credit. If the child falls off their bike, they are going to have “road rash” not a black eye. Doctor’s know what kind of injuries point to physical abuse, and I think they would question the mother’s word that a scraped knee came from abuse. Make sure that everything you do is well documented and legal. If the children hurt themselves while at your home, document it. If they come to your home injured, document it. That way, when or if she does this, you will have ammunition to defend yourselves.
I would still talk with your employer and anyone else that you need to to let them know. When I posted on the other question I said to “Keep in mind that anyone who knows you or your wife will know the truth. Hopefully, have enough people who are close to you two and the children that are willing to step on a witness stand and testify to your relationship to the children and that the discipline measures for the children are not more severe than necessary.” This way, the effects of this on your job or school would be lessened since they know what to expect. Right now, with the custody battle raging, your husband’s lawyer is probably right. If you lose your job because of this, then I would absolutely file a civil case, regardless of whether or not it shows vengence on your part. In the mean time, don’t feed the drama. She’s trying to scare you and your husband into giving her the children so they won’t have to be around you as a “wicked stepmother” that stole her husband and took her place. Believe me, I know this from experience. The more you react to what she’s doing the more it is going to affect your life. Let her spend her energy on you, while you and your husband focus on the children. They ARE what this is all about for you and your husband. For her it may be money and control but eventually others, even the children, will see that. I found that the angrier my husband’s ex got at me the more damage she did to her own reputation in vain attempts to ruin me in her children’s eyes. Research what the courts will look at and start making your case for custody stronger. You said it’s taking a toll on the kids and your marriage. That’s because you’re letting yourselves be sucked into a world of chaos and drama. Don’t play that game, that game, nobody wins. Let her burn herself out trying to prove something that can’t be proven, while you build a relationship with your stepchildren.
I would consider moving if it’s at all possible or at the very least, put up a fence. If her parents live next door, there’s never going to be any good come out of that situation. We don’t even know where my husband’s ex lives. They have a sitter and a mutual drop off place if they have to exchange the children any other time than after school. She made sure to find out where we were moving to though, mostly so she could call and curse him for being able to afford to buy a house when she couldn’t.