Oh, Neg, I feel for your situation. Divorce is always painful and doubly hard when there are children involved (been there).
I think you have described a couple of different issues here. It might be most helpful for you to sort those things out:
1. Your house is upside down in value.
2. You aren't sure if you and your husband still own the property together.
3. Your ex is making all of this more difficult by confusing your children.
The last one has to be the worst. It's almost impossible to explain difficult things to children anyway, and this issue is doubly painful since you lived there as a family.
You have alot to sort out, but I would start by identifying what's really going on and deciding what things are worth fighting for and what battles you can't win. I wonder if your ex would EVER be willing to back off no matter HOW much evidence you give him to support your claim.
As for being upside down, unless you have a legitimate financial hardship, chances are the bank might not approve a short sale and/ or may hold you liable for any amount of money you're short, meaning the amount you owe the bank vs. how much the house would sell for. Make sense?
Good luck to you. I'd still consult an attorney, especially one who specializes in short sales!!!