OK, he wants to carry on as we are, but clearly, you don't. It sounds as if all the compromises are on one side at the moment. I notice you are worried about how he will manage, but you don't say anything about how you would manage without him, or how you would feel on your own when your children were staying with him. Are you responsible for everyone's happiness but your own?
I could be rationalising here, given that I left a marriage that was making me very unhappy, against the wishes of the rest as well as my own principles. My theory is that a family is not an entity that has to be preserved at all costs, or some utilitarian unit; it is the sum of the people within it, who are there for reasons of affection as well as biology. If one member of the family is deeply unhappy, surely it is an issue for all the other members, or ought to be. Yes, every member should put in their bit, have consideration for the others, and not whizz off to please themselves on a selfish whim. Not only families but the whole of civilisation would break down without the glue of responsibility. But you get to the point where one person is doing all the giving and the others happily sitting around accepting their sacrifice, and you have to ask yourself: why? All those things you sign up for when you get married, they're supposed to be mutual. If one partner has a problem, it is the other partner's problem too. If your OH for some reason can't have sex but is otherwise a loving, supportive partner, there's a strong argument for working round it somehow - but that means an acceptance of your needs and frustrations too. I don't mean necessarily that he should let you take a lover, though that does work for some people. If he is capable but not interested, and you're supposed to just suck that up, er, why should you? You won't die from not having sex, but you may well live two or three decades in a state of almost constant frustration (emotional as well as physical, as you say). But that's all right because he's happy. Or is it...
I think the bottom line here is, if this is an important issue to you, you have every right to demand it is taken seriously. Perhaps if your DH knew you are contemplating separation he will finally listen to your reasonable complaints - but really, he should be listening anyway.