Jazzicatz - You should get out if you feel you or the children are in danger.
BUT, my dad was like this and never hit us and I would not have wanted him off the scene because of it.
He was lovely and cuddly and played with us. But he would lose his temper in a flash, shout and throw plates about. It was scary, and it has affected me. I really wish he had realised how bad it was and had got help. My parents ended up divorcing.
Now I have two young children of my own (5 and 2) and I can see how easy it is to become detached from your partner, and how easy it is to become depressed. My dh, who is a SAHD, often feels gloomy and can be very grumpy sometimes. He will always apologise for inflicting his mood on other people - not that that makes it OK!
Anyway, I'm just saying that your dh needs to realise that it is unacceptable, serious, and he is in danger of losing you and the kids if he doesn't get help. It's OK to have an exit strategy but could you not also consider that he could get help and become a happier person for himself and his family. Things might even improve between the two of you if you discuss it without blame and honestly. I know that I can get into a situation with my dh when he is stressed out where I think I could do without him. But when we talk over what's happening and why I find the friend I fell in love with in the first place is still there. Bringing up small children can just be v. stressful.
Although what my dad did was wrong, I love him dearly, and I think if my parents had been a bit older they might have sat down and talked about it instead of my mum unilaterally making the decison that the family was splitting up.