OP if he has a variable spousal maintenance order it will never be resolved, because she could come back and do the same thing again in the future. Probably just after you marry. She's obviously a money grabber.
The only way it'll ever be truly sorted is with a clean break order. Preferably one stating zero spousal maintenance.
He also needs to cut back on purchasing "all the extras" for his DC. Their mum is going to have to start coughing up. He is no longer the gravy train for them all. He should pay CMS amount, beyond that he doesn't have to pay anything. So if he does, it should be after considering the impact on you, not just on himself/them.
You're already subsidising his life. Likely you're paying more in bills than you would in a smaller cheaper property, you'd only be buying food for yourself and DD not also for him (and his DC when they stay?) and although you'd have rent or mortgage, you'd also have the freedom of being a separate entity with zero risk of being embroiled in anything to do with his ex wife.
Before getting more involved I'd also consider whether he's shown signs of wanting a more solid relationship with you before he became unwell or whether there's the possibility he's mainly looking for a carer.
As you've seen, government agencies and other forms of officialdom are not linked up. The family court judge doesn't care about the ex wife benefits fraud. If indeed it is fraud. In some cases people can claim and work for a while, if they're transitioning back into work. If you want her investigated you'll need to report her to DWP. If she's doing nothing wrong then nothing will happen.