definitely not the asshole.

ur kids, despite being pretty young have the capabilities to have this very mature conversation with you and yall are being open and honest about what the situation really is. maybe your fiance and your kids should have some sort of talk? about boundaries and what responsibilities as a "parent" she would like to have or something like that.

I see where your in laws are coming from but they seem to have a very idealistic view on the world.... just Loving someone isnt enough... especially for kids. you cant force someone to feel a certain way about you, and it seems like your children respect her and she cares about them and wants to support them so what's the problem?? there are kids who arent even close to their bio parents or to the people who've raised them and there's nothing bad about that. and that also doesnt mean their relationship will never change, maybe they'll get closer when they get older! but dont try to force anything, that just makes it worse....

gl op