I agree with Wookie, it's time to get tough, being understanding and sweet about it has got you no where and he is taking advantage of that.
If he has decided that this friendship ends when he says so then you will do nothing but make yourself ill, now what have you got to lose by rocking the boat, he's not listening and with each further conversation he is resenting you and creating a bigger void all to his advantage.
You will get to the end of your rope and explode and I think that is what you are being forced to do, to press the nuclear button. This nuclear button for him at the moment may seem very liberating but in reality it involves others arround you realising what a complete shit he has been. His bravado will say he's not bothered and no one else cares about your union but it does, especially in laws and children, factor in work colleagues, neighbours, friends, old friends that come out of the woodwork, gp's, scool friends, the local community, shopkeepers everybody really, and that ammounts to quite a bit of judgement for just a 'friend' that he won't give up, and it burns like wildfire.
Other people are not stupid, they realise when a friendship intrudes in a marriage to get to the point whereby there are ultimatums and rumours then you have a spouse that is not behaving as they should within a marriage.
I would start with going to your gp (female if possible) and explain the situation, they have heard it all before and the female ones are usually very supportive, he is making you ill, consider medication if you can take it.
He clearly doesn't want to show you the respect you deserve so you must regain your own self respect and that means begining to act like a single person again, just like he is behaving, you concentrate only on yourself and the children.
No sex, no cleaning, no cooking, no sorting his life admin, no involving him in your day, no discussing daily events, grey rock him. He doesn't deserve a home life, he deserves exposing for the disloyal piece of shit that he is.
And Christmas, plan it for yourself and your children, leave him off the Christmas card, and the visits/invitations, he's given you an awful year, no need to celebrate that.
I know you are trying to keep the cart on the wheels but the load is too much to bear now on your own, start seeking support.
Let's see how far he will go in his defiance.