Okay, I might be completely wrong here, but I am wondering just how committed to the relationship the DP is.
I think it is great that he is spending lots of time with his DC, but I do wonder how much time he's spending with the OP. She (and her children) can't be the only ones to do any compromising. He has to be as committed to spending 'quality time' with the OP as he is to his DC.
I also think that if he's looking after them for 50% of the time, then he shouldn't be paying child support to his ex as if she was looking after them 100%.
I think that if he moves in and they marry, then this could go very wrong for the OP if the relationship fails. Having come off worse financially the first time around, he will not want that again. The OP could end up losing her assets.
All this is very convenient for the DP. He gets somewhere to live, doesn't have to pay as much as he would if he was maintaining a home independently, the OP is helping to raise his DC. He may lose his job and I can see the OP having to support the whole family. Support from the state would be limited because the OP would be classed as a partner, so her income would be taken into account. Seems like she could end up with a lot of the responsibility and not much of the fun.
I admit I might be judging very unfairly and I don't know the DP, but I'd be reluctant to blend everything at the moment.
I also prefer the idea of getting a completely new home, if that's possible and contributing equally, so it is neither your or his, but belongs to you both. That way the DC aren't losing what is theirs (bedroom space) but are staring from scratch iyswim. He can only do this if he's financially okay. He can't do it with the OP's money.