Oh God, I have been here too. Yes you have a third wheel in the relationship and he is still in an abuse cycle.
This all sounds so familiar. I think with the guy I was with he was so used to appeasing his ex, to try to calm her down, that he was still inclined to do it. I don't think he could see that this was feeding the bad behaviour and making her more inclined towards throwing tantrums in the long-run. She seemed to generally get her own way. She also used the children as weapons (erratic in letting him see them one minute and not the next, and she seemed to be bad-mouthing him to them and so on).
It didn't help though that the legal situation here is not good, a lot of guys seem to get screwed in the courts (I am not in the UK), and it is very expensive here to fight out things like custody/divorce in the courts if one person refuses mediation. As well as this custody orders are often not enforced, so having a decent custody agreement is no guarantee of actually seeing the children regularly.
He did stand up to her a bit initially (including over me) but then she got creative, and really crazy nasty (invloving a false police report, and she threatened worse).
Though on the one hand I could understand his behaviour and see that he was between a rock and a hard place, I also felt that if it was me I would have been more pro-active at getting more specialist advice, and at least going to counselling to sort my own head out, to build my own confidence, and to try not to be enabling her. I think if he had stood up to her more effectively the shock might have stopped her in her tracks.
He split up with me in the end partly because of the stress of it all, and partly because he felt in the end that he wasn't ready for a relationship (though I doubt this would have been an issue without the crazy ex). But I am not sure he will ever be free. It felt almost like being a teenager needing parental permission, but from an unreasonable control-freak parent.
Like you I think if I had been with him longer I would have started to lose respect for him in the end, and I also would not be willing to have my own life so controlled by a crazy person. But I am still broken hearted over it all, as he was really lovely and I think we suited one another, and it was sad to see him being bullied like that.