Firstly, a safeguarding letter is part of every child arrangements order application - it's not unusual, and it's not 'ordered due to 'false allegations made against you'. It's a brief letter setting out what each you and the mother have told the cafcass officer, and the brief initial safeguarding checks cafcass carry out in all cases with police and social services, followed by brief recommendations that cafcass thinks the court needs to help them decide the case.
A s7 welfare report can be ordered by a judge, it's more in depth than the safeguarding letter, and will cover a lot more information from both you and the mother, the kids, the schools/nurseries, the police, social services and any other professionals involved in order to make their determination on what to include in their report. The court can also request police disclosure. Perhaps you meant a s7 report.
Secondly, a couple of issues that immediately jump out from your post:
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If your wife was going to disappear to China with the kids, she could have done so very easily in the five months before you 'found her and went to court'.
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That claim also contradicts her wanting to use DV to be able to stay in the UK.
I know this isn't what you were asking about, but it's the sort of thing that the court will ultimately look at (veracity and consistency of claims) when determining any allegations either one of you makes. The application to 'seize' passports could be seen as controlling.
She says you were coercive - you claim she 'dropped the charges' - that's not a thing in English law, however, she may have been too frightened to continue with her allegations, and told the police she didn't want to cooperate - the police still kept you on bail until deciding NFA. You say you found out she was undertaking risky behaviour with the kids in the same room, yet you appear to not have done anything about it at the time, but now wish to raise it, some 9 months after all this started, during the CAO proceedings. These types of inconsistencies are what the court will look at, because a good lawyer will draw them directly to the judge's attention.
As a PP said, the court will order a fact finding hearing if there is a necessity for it, which will be determined on whether or not the findings would impact on the decisions being made for the kids.
Be aware that cafcass don't do the 'deciding'; the safeguarding letter has minor recommendations on what the court might want to do next. A s7 welfare report, being more in depth, will have recommendations on whether spends time with/lives with orders should be made, and how and in what pattern, but it is still the court that decides, and generally, if there is a dispute, that decision will only take place at a final contested hearing during which there is likely to be cross examination of both parties and the cafcass officer.
Your kids haven't been 'abducted', they're still in the country. Your health issues won't have any impact unless it makes you unable to take care of the kids during any time allocated to you.
The other thing to be aware of is just because the police ultimately NFA'd the matter, the family court is not bound by that, and can make its own findings.