Wow ((((((WW))))))) that IS a lot to hold in! Though your post is long, I know there is much more to the stories. Sigh. That your children are thriving in spite of all this means you guys are doing "something" right!

Newspapers are notorious for getting stories wrong. You have the right to send a letter of correction, or at least of your side, and have it published. (I know that may seem impossible to do this too..) You have to choose which battles you will fight. I'm sorry there wasn't any legal advice to help you win against the horrible school. And I'm sorry relatives are acting just like... relatives!

Praying that you will be able to sell your home. I think that would help... but might also cause more dilemmas. Hang in there.