Hi there mumsnetter's,
I'm not a mum, but am a final year psychology student researching parental responses to cyberbullying (I've got a link to my research project to the media & requests pages of Mumsnet). I'm horrified by what you and your families are all dealing with, and wish I could give you an escape route, but I'm afraid there isn't one (I was cyberbullied/bullied throughout my school years).
What I can suggest is that you report everything to your children's schools and to the police. But don't go in all guns blazing as it's more than likely to make the situation worse if the bullies find out. My mum went in to my high school and made a huge scene, demanding the bullies were brought to the head's office etc etc, and it made things 100 times worse. My bullies went from only targeting me online to targeting me in school- trying to get me into trouble at any possible occasion and even started picking on my boyfriend and sister.
I was also told to keep a log of everything that happened and who the nasty messages etc were sent by; get your children to take screenshots of EVERYTHING that could be classed as cyberbullying. That way when you report it to the school/police etc you'll have solid evidence of what's been happening rather than the usual 'he said, she said' that comes with traditional bullying.
I'd also talking to your children and discussing appropriate websites and behaviours, and help them to set their privacy settings on all of their accounts. I've been an avid facebook user for 5 years now, and still struggle to fully understand the settings but think I've got everything set now. If in doubt, a quick google search should reveal the best way to approach privacy settings for any website.
If you're looking for professional advice, I'd suggest looking at the support pages on the Childline, BeatBullying and NSPCC websites as they've got some great info and advice aimed at both parents and kids.
I'm not an expert by any means, but I've been through cyberbullying myself and know the hurt that your children must be facing. I hope that things get better for yourselves and your families, and that the bullies are made to pay for what they've put you all through. Mine weren't, but going back to my parent's home town and seeing my bullies walking around with little or no future prospects is enough compensation for me!