I said she can sell up and buy again somewhere smaller but all I get from her is I'm too old to start again.
It isn't a choice. The sooner she accepts this the better. She is separated and he's going to file for divorce at some point, her life has already changed, she's already starting over and it's going to eventually include living somewhere else unless she wants to buy him out of the current house.
He has said 50/50 and to give some to the children out of each of their money
He can say what he likes, it needs to go through a solicitor and be sorted as part of the divorce. He can do whatever he likes with his share of the divorce money, he shouldn't be mentioning, advising or demanding what she does with her share because it's none of his business.
he is very broke and from what he's said he can't afford much food either now the hours have been cut at work
And who's fault is that? He's been paying rent, so he had money. His choice to spend it on a rental where he could shag the OW instead of on a solicitor to instigate divorce. He's not an innocent party in all of this. He's made poor financial choices and now he's facing the consequences.
If he can't afford to live he should look into claiming universal credit, council tax credit, contact utility companies to check he's on the cheapest deal and ask if there's any help for low income, ask for referrals to food bank from GP and look into community food places in his area where he can obtain cheap food. All that should go some way towards helping fix his situation.
He'll still need a divorce though, I'm not sure UC will be willing to pay towards rent when he owns a house which he could be living in. Lots of people have to live with their STBX until divorce is finalised if finances don't allow for anything else. I noticed someone said your aunt may be abusive and I had wondered that myself, it might change where he's expected to live if true although I don't know how that works. UC can probably tell him though.