He is either 1) prepared to call off a wedding and humiliate you publicly over an issue where you are entirely logically in the right or 2) prepared to use the threat of doing so to make you change your mind over something you - and your CHILD! - care deeply about.
I generally don't think anyone should have to change their name, but I the situation you outline with your kids, of course it makes sense for you not to change your name. How cruel to your eldest to do anything else.
I would be tempted to tell him at this point you're not changing your mind, but if he can't accept that, the relationship is on the line as much as the wedding. Though I know it's easier to say that from the outside.
I'm getting married soon and won't be changing my name, and nor will my DP. No kids yet, but we've agreed they'll be double barrelled. DP has said he sometimes wonders if we should also both double barrel when we do have children, if having different names to them would be strange. I've told him I'm happy for him to do so but once I share one name with my child I don't mind. I'm known by my name in work and don't feel like changing it. Ultimately, it will be a joint decision up to a point about children, but neither of us would impose on the other. I can't imagine how I'd react if he started telling me he wanted me to change my name to his.
I tend to think this issue can show a lot of men's true colours. A lovely friend's husband essentially tricked her into changing her name- she didn't want to, then agreed to change it in her passport as he said t would be easier travelling together, then he started signing cards 'the Hisname family' then suddenly... That was it, he basically wore her down. And ultimately, it shows in other subtle ways: feeling he should have final say on financial issues, where they live. I really think less of him after that. I know this one issue won't define your relationship, but don't let yourself be bullied at this stage: it's a slippery slope.