Lessoftwoevils,
Would you describe your H as an alcoholic?.
You are not going to break up a happy home if you were to separate and or divorce - this household of yours is already broken because of your H's drink problem.
There are no guarantees here - he could lose everything and still carry on drinking. You are NOT responsible for him; you are only responsible for you and your children ultimately.
What do you think your role is now in this marriage - I would say that many people in these situations end up as their partner's enabler. Do you think you are now his enabler?.
You are likely acting as his enabler now but enabling helps no-one least of all you. Enabling just gives a false sense of control. How many times have you had to make excuses for him to family/employer, covered up for him etc?.
How many people in your real life know about his drink problem?. Very few I imagine. Alcoholism thrives also on secrecy.
I guess you thought he would "change" a) when he met you, b) when you married and/or c) when the children came along. However, as you have seen this is a triumph of hope over experience.
As for the point C mentioned earlier there is a problem with that. This is that he will NOT accept help unless he himself wants to take help. He is likely to be in denial about his drinking too and also underestimtes how much he is actually drinking. You cannot make him seek help but you can help yourself and your children. I would talk to Al-anon as they can help family members of problem drinkers.
Getting back to your original question I would have to say B for you all to be happier in the long run but that is ultiamtely your decision. It is better to be apart and happier than to remain miserable within the marriage. Your children are picking up on all this and they are learning from you both. You cannot shield them completely from his drinking habits, you cannot succeed completely in that area. They see it all, hear it all, you cannot fully protect them from his drunkenness whilst he is around. Your seven year old is already commenting on it. How do you respond?.
Being a child in a home where there is one drunken parent in attendance does them no favours whatsoever and can leave them with all sorts of issues as adults if you did not act.
They will not thank you for remaining with their drunk Dad either should you choose to do so because they could well accuse you of putting him before them.
I will put up Al-anon's details for you along with NACOA's.