So many issues here.
Firstly, is your DH happy to spend his holiday with his in-laws, as that would be hell-on-earth for many (& could contribute to the stress-factor)? Is he looking for an excuse to go home?
Secondly, kids your DC age do not need someone to sit with them for 45 mins while they go to sleep - not something to sort out this holiday, but when you're home you both need to change that. They're not babies anymore and as well as making your own evenings much harder than they need to be, the two of you have given your DC the impression they need a parent with them to sleep which isn't healthy. If they were used to settling themselves, tonight possibly wouldn't have gone so badly.
Thirdly, and most importantly, DC do not have the tools to explain how they feel, so they behave in a way which sets others up to feel how they feel.
If your DC were making your DH feel stressed and angry, it means your DC are feeling stressed and angry.
The stress could be from being in a different location/ having to share a room / Dad trying to rush bedtime as he's on holiday when they're used to 45 mins of parent focus on them at bedtime, etc etc. But you need to make them feel calm and happy, so they project that back to you/DH.
PP's ideas of settling them in different rooms etc are good; maybe each take a child and put them to bed separately tomorrow (you've made rods for your own backs with the having to sit with them for 45 mins each, but it is what it is at this point).
Lastly, your DH's anger issues and threats that he doesn't see through need to be addressed. That's terrible behaviour to model to his kids.
You say he recognises it's not great behaviour and he's put himself in a situation today where he doesn't know what to do tomorrow (which is destabilising for both him and the children) Would he consider taking parenting lessons?
Obviously that doesn't solve the problem immediately, but could be cheaper than divorce.