Unfortunately Taiwan´s law gives way too much power to the local spouse for this olive leaf to work. If she is angry she has all the tools at her disposal to be as vengeful and nasty as she wants to be… and get away with it.
She can just lock the OP out of his house, their life, anytime, and there is nothing anyone can do about it. We have had several cases here on these boards of people who have come to an empty house or worse, been kicked out with not a penny, not even their passports, on hand.
It is very commendable that you propose that the OP tries to understand that the wife might be overwhelmed with work and kids. She certainly seems like she has emotional issues .like, lack of maturity and communication issues-, but she is one kicking the OP out. She clams up and refuses to communicate. Moreover, we have seen these kinds of issues with local women who do not work nor cook or take care of the kids, just open their hands and the foreigner puts his salary and credit cards and car keys on her hand.
Last one I saw did that, she controls his salary, his life including who he is friends with, when he goes out, how he uses the car he bought, who he sees and what he does. He is miserable but she holds the children hostage, so there he is.
Back to our case:
The best thing would be for the OP and his wife would be to get counseling, to see if they can communicate. However, with the family “support”, the wife has little incentive to do so. As said, no one likes to be proven wrong. It is very easy for locals to revert into childhood when the going gets tough and just evade the responsibilities of growing up because their families interfere way over too much in their marriage and married family life. The family elders like to exert control over their “children”, who hence never grow up.
Finally, as a child of divorce too, I can tell you the children will be hurt mostly by becoming pawns between parents. Here the danger is that she refuses to allow the husband to see his children. She can use the kids as weapons to hurt him because the law allows it. If the OP does not fight for them, they will become another clog in the machinery of their family, manipulated without independence. They are currently learning to avoid communication, and that will hurt them in their future relationships.
One thing is avoiding confrontation, the other avoiding communication. One should not escalate a fight, but giving up cash will not solve their marital problems. She will not be satisfied. She will then look for another angle to attack, as long as she is upset and refuses to look for a solution other than divorce.