Oh Stitch, he sounds beyond awful .... in fact, he sounds terrifying.
If there is NO financial need for you to work then you need to ask yourself what it is that you actually want to do. If you want to work, for yourself (albeit at effectively no pay) then fine, but if you feel that you would rather be a SAHm for now, then that should be fine too.
Though in your case, I am actually coming round to the idea that working might be good for you as in helping you feel more confident, which in turn, will hopefully enable you to be more assertive in your realtionship, if you stay. And if you don't, the job will give you security and you'll find that suddenly, with tax credits, it will start paying, allowing you to support yourself and the kids.
The way he speaks to you about getting a job is dreadful and inhumane. But now you're saying that only certain sorts of jobs would be deemed good enough by him anyway ..... strikes me that whatever you do, whatever job you get, he's always going to be picking away at some aspect of it.
I feel awful commenting on someone else's marriage, but really, would you be any worse off without him, without the constant belittling, the constant control, the constant putting you down ?
I don't understand what you meant about not being able to leave until you were in a position where he or his family couldn't spend much time with the kids ? You know, I'd never normally advocate this (having a partner who is a responsible dad whose contact with his kids is continually spitefully obstructed) but mothers generally have so much more power than fathers in contact situations. You sound scared of him - and mental abuse IS still abuse - and I would have thought that you could have quite easily obtained an injunction against him, which would then help to limit the time he had the kids, if you are genuinely concerned they might be affected by him.
If you refused contact - or didn't offer him "enough" and he took you to court, it's very unlikely (unless you were a drunk, druggie or psychopath) that any more than every other weekend contact would be awarded to him, possibly even less. Believe me, having been closely involved with the "other side", if a mother puts her foot down, there is very little in law which is ever used to force her to play fair. So I think you have little to worry about in that respect. Solicitors (lots do 1st half hour free) and/or the CAB would be able to tell you lots more about contact issues from a legal perspective.
You can't go on like this surely ....... the money set-up in itself is cruel and unnecessary.