Oh giz, I just back tracked and read your post, sorry I missed it earlier.
I would be honest with the kids. Tell them you are living seperatly at this time and you aren't sure what is going to happen, but what ever happens, their mom and dad love them and will always take care of them. Lying to them just adds to the tension.
As for the rest. Whatever your comfort level is. My ex comes to the house and stays during the day when the kids are sick and I can't get off. So far it has worked well. He wanted so bad to put in the divorce degree that we would do "nesting" that the kids would stay in the home and we would move in and out for custody. My lawyer said no way. His lawyer said no way. I told the ex, we could work something out on our own. Funny thing is, since moving out, he hasn't been back here to spend the night. Not even when I offered.
You decide what you are comfortable with. Not what he is comfortable with.