I just checked his w-4 witholding and it currently states that he's single and has 0 allowances- so I should change this to married and 2 allowances, for our children, correct?
You definately need to refile his w-4 and there is a good chance that he can file "exempt". In addition, you need to look into getting your EIC (Earned Income Credit) in your paycheck instead of in your tax refund. That could be hundreds of dollars a month.
It doesn't matter if DH is working 6 days a week if he is only working 3-4 hours a day. That is not a full time job. Your family would be MUCH better off with him working a full time job 5 days a week at $8/hour! Apply anywhere and everywhere. Here, at least, he could make a lot more being a server at a restaurant.
Costco and Unionized supermarkets are great places to work. Another option is to target jobs that provide educational assistance. Even if its not a great job *now* if they will help with school expenses it can be a great career choice. I know that where I grew up Intel was a great place to work for that reason--- get on as a data entry person and then end up a mechanical engineer (or something similar). You have to put in the time and the effort, but it can really pay off.
It also sounds like a major move may do you well. How long is the waiting list for Section 8 housing in your area. Do either you or DH have educational aspirations? Do you have family elsewhere who could help during a transition? I just don't see a long term solution to a monthly income of $900 for a family of four unless you have an unbelievably low cost of living.