My wife and I have been married for 7 years, we have two kids and I'm a transplant from Hawaii. Over the years our fighting has gotten more intense and has been more outward where it doesn't matter if friends and kids present. Over time I've been losing my spark or passion as we drift apart due to these fights, more or less we just play house.

Just recently we had a passive fight in the morning about drifting apart. Later that evening we went to an event with some friends just a few doors down in which all of their kids intended to sleep over at our house. Luckily our kids were at grandma's house for a sleep over. She ended up getting drunk (not a new occurrence) and went home. One of our friends tucked her into bed and came back to the party. Shortly after Two of the kids came to the house to get me because she woke up and stormed out of the house toward the party. When I headed back to defuse this she punched me in the face twice in front of all the kids. Shortly after I helped all the kids/families home to empty the house as this is in every way wrong. She Doesn't remember anything from that evening. I asked her for a divorce that night and felt the same in the morning.

I am struggling though, my main concern is our kids and the trauma divorce goes through. If we didn't have kids I would be gone. We've decided to go to counciling but I'm not sure if it will change my personal feelings of not continuing on, and if my only decision to is the kids. I'm not in love with her at the moment and not sure if it's because I'm mad and being assaulted. If the situation was in reverse I'm assuming that I'd be out and she'd divorce me for physical abuse. She's never hit me before but many things have been thrown as our fights have escalated over the years. I'm not a victim but I have high moral standards and would hate for a future fight and our kids see this. I'm devastated that our friends kids witnessed this.
I told her the only rational choice right now is to see a councillor but I'm not sure if I would feel any different about it. I don't want to fall back into pretending and playing house and I don't want to make a life changing permanent decision mainly due to the we'll being of my kids. Any advice?

You blew it.

If you had called the police, she would have been arrested for domestic assault, which would have allowed you to get a restraining order. At that point, you could dictate custody.