I know it's scary to think about that much change. And it is ROUGH, having to be the mom most of the time and then figure out how to adjust emotionally when the actual mom returns to the picture (and then exits again...). My sympathies!
* EOW, 1/2 the summer and alternating holidays sounds pretty standard. Considering everything, progressing to more time sounds wise. But you should prepare yourselves for the probability that this is the amount of time she could end up with. Then, if she becomes inconsistent you can ask for a modification, based on the difficulty for the kids (and you and your DF!) when she frequently doesn't show up for the time she requested. But, for now, if she seems to be making changes (calling consistently, taking active steps to get more time with the kids and even having another child which could conceivably change her attitude about being so inconsistently involved in her OLDER kids' lives...) and if she's not on drugs (she should be tested, if that's been an issue); then the Court may be reluctant to deny her a standard parenting time schedule...and your DF may risk looking unsupportive of the kids' relationship with her, if he opposes it, or wants too long a progression to that schedule.
* In our state, the NCP getting ALL of the school holiday time (Fall, Winter and Spring Breaks?) is only in cases where the NCP lives too far away to exercise regular parenting time. If she plans to have the kids EOW, she should alternate these breaks with you guys, just like other holidays.
* Personally, I prefer how my state divides summers:
>> The NCP has until April 1 to elect whether to divide Summer Break into halves or quarters and which half (or which alternating quarters) he/she wants. (If the NCP misses the deadline, the summer still gets divided the same way, but the CP gets to decide.)
>> Throughout the summer, whichever parent does NOT have the kids exercises the same visitation schedule that the NCP exercises during the school year.
>> Both parents may take the kids on a vacation of up to 2 weeks (during their half or one of their quarters of the summer, of course.) The vacation can be far away enough to render the other parent's visitation impossible, but if it's NOT, then the other parent can still exercise their visitation.
>> The NCP is also expected to tell the CP when/where he/she is taking his/her vacation, by April 1.
With shrinking Summer Breaks, 1/4 of the summer may not be much longer than 2 weeks (maybe 3?). But overall, it sounds like less upheaval for the kids, to only switch their summer "home" 2 or 4 times...but while they spend longish periods with each parent, they still get weekly (or in your case EOW) time with the OTHER parent.
* What are her childcare plans, for the summer? If the kids are going to spend all week in daycare when they're with her - and if you stay home with them - maybe they should only be with her on weekends.
* I don't understand what she wants, with C/S? She wants you guys to pay her? (If so, what? Calculate what she should have paid in C/S the last 4 years, if she made even minimum wage, and point out that she's paid nothing. Even her own proposal still has the kids spending ~3/4 of the year with you!) Or she wants to pay you only 75% of what she owes (keeping the other 25% for herself because she wants to have the kids ~25% of the time)? If so...well, what are the laws where you are? Here, the standard C/S calculation takes into account both parents incomes, the expenses of prior or subsequent children, childcare costs, who pays for health insurance and how much time the kids spend with each parent. If your laws are similar, you should calculate C/S and expect her to pay it. And if she doesn't wind up exercising a good chunk of her visitation, you should take her back for a modification next year and ask to adjust the "parenting time credit". If she wants to be a full-fledged parent now, sharing the cost of her children's needs is part of the package!
* Ask the Court to order a custodial evaluator or guardian ad litem (less expensive) to do home visits. You have a right to know your kids are going somewhere safe and appropriate...and who else may be living there. You should be ordered to share the cost of this evenly, regardless of the difference in your incomes. It eliminates one party accusing the C/E or GAL of bias, because the other party paid her. Also, the C/E or GAL might support your DF's proposal for progressive visits - or might advise that the ex isn't ready for as much parenting time as she's requested...and then it wouldn't be DF keeping his kids from spending more time with their wiggy Mom, but a professional!