Well, no, you couldn't have SOLD both houses without getting somewhere else to live, could you?
If you'd both sold your homes when you got together, and bought a new one, you would presumably have divided the ownership according to who put what in. You'd have agreed between you how to pay the mortgage and bills, then revised that when you decided one of you should stay home with DC.
This has only kicked off because you both decided to live together in her house. Had you done it the other way round, can you honestly say you'd agree with DP that she should keep all the proceeds from her place, after renting it out and living at yours?
Would I be right in assuming her house is bigger/more valuable than your old place?
It's slightly worrying that you can't figure this out sensibly, between you. Are you sure you're ready to get married? Since you asked upthread, btw, all marital assets are owned jointly - that is, each spouse owns all of it (much like equal partners in a business partnership). If you split, assets are divided more or less equally with primary consideration for the children: courts often decide to leave the primary carer in the family home with the children, until the youngest DC reaches adulthood.
I think MmeL had it right earlier on. The big issue is that DP was shafted by her ex, and is understandably cautious about leaving herself vulnerable again. In demonstrating what looks like an attitude that "what's yours is ours, and what's mine is mine," you can't exactly be helping her believe that you're different. You should be able to figure this out sensibly, without emotion but with due respect to her greater vulnerability ...