#1 is that you are not TRASH of any sort. What I can tell you, though, is that you are becoming emotional and you might lose sight of yourself in all of this. Can I ask you to consider that you are the woman he married, he loves you, he may not know how to handle your emotions though. He will be torn between his love for you and his love for his kids and that's not a good place to be.
The kids are doing what she tells them to do, baby see baby do...right? BM might feel threatened by you, or jealous of you, which I'd take as a compliment incidentally. Tell DH that you are aware that she is being vindictive, it hurts you and ask him what he thinks would be a solution. He can tell her stuff until he's blue in the face but every reaction she gets is satisfying her own ego and lessening her feelings of insecurity, or that's her horrible reasoning anyhow. She will not stop just because someone says she should...right? Once you stop reacting to her then she will not get the same satisfaction and she'll give up. I was more bold than that and when BM here threatened to do horrible things I called her out and told her to 'do her worst!'. It sounds like there was a decent relationship going on initially, BM is doing her utmost to spoil it but she's the one making herself ugly and the kids will come to understand that if you and DH hold firm, you are going to have to wait for DH to catch up with your thoughts though...since he really is in the middle of it all and might be worried about pleasing folks, or not upsetting them. Your best weapon is your smile! Be content within your own self, know that it's really on them if they want to be a$$holes. Feel sorry for them...tee hee how about a 'benevolent' smile for them??

I am going through some similar crap with our bm. Keep your head up and remember your happiness is the BEST revenge! She's pissed cause you two are happy and she is obviously very miserable. Don't sink to her level. She will get tired of getting no reaction out of you and stop. Good luck!