If she wasn't depressed, she'd still be toxic, manipulative, jealous and trying to push this boy out
Playing advocate but how can anyone of us know that? She is acting horribly at the moment, and I agree that depression alone wouldn't explain it, but the stress caused by the sense of helplessness that linked with depression could.
OP loves her so there must be something loving about her and indeed, it might be that if the triggers of her stress are taken away, she might be a very reasonable, if not pleasant SM. The issue is that she seems to believe that the stressor of her life is OP's son. If that is correct, then taking this out is not an option and OP is therefore better off moving on.
If however she is transferring the stress into him, but actually what is stressing her is not being able to have OP with her every night/mornings, then maybe there is an opportunity to look whether this could be envisaged.
I do totally agree with most posters though that if I was OP, I would be extremely anxious at the prospect of considering it without any certainty that this would sort out the issues rather than making them worse and I am not sure what she could do to give him that reassurance.
Some things you can take back. They should have moved together and see how they lived together with their respective children before deciding to add one and realised they couldn't afford to move in together. Now it is too late to do that without taking a big risk.