savagj1, I don't mean to be rude at all, I will admit that I am against stuff like this, because I was in the position that his children are in before, but by the way you described it, when you had that hour phone call with her, she said that their relationship was just 'friends..' so how did it esculate from there to you having to split up with him? And considering he's now moved out, surely it shouldnt be a problem telling her?
Maybe the first thing to do would be to tell her that you're together, just to start with. don't pile everything in saying you're getting a house and having a kid, because it'll be too soon for her, just tell him to take things slow.
I hope this makes sense, and I apologise for before, but like I said, I am against this, but I understand the position you're in.
Lou x