My room mate did the same thing she getting married to a guy she meet on my space . But she never meet him but says she having his baby and sends him money all the time he live over seas in some weird country.

As far as you losing the kids you wont . They will make her leave the house and force her to get help they wont let her back to see the kids if she doesn't,t .I know this because it happen to me .I didn't think I was sick at the time but now that I look back I was well I missed my wife and kids I know now it was for the best . I got on Meds. and went to groups to learn to live with my mental illness thats how I got a roommate .She is living the same kind of fantasy your wife is .

You need to talk to the doctors about 302 (thats putting in the hospital wether she wont to or not its done by the courts )and then call CYS In my state thats children and youth were they can legally make her move out and get help if she poses a danger to her self or others and from what you said she dose .Hopefully that will snap her out of it.

I know from Exp. when we are that sick were not our selfs and dont think right and unless we are force to get help most of us wont we dont know any better we are just in pain and will do or take anything to stop it .