Sorry to hear you are feeling so down on the whole business thing - it can be so frustrating sometimes. It does sound like you are doing extremely well with sales (!) and my first thought is to echo lilyka on your pricing. I don't know what your pricing structure is like right now, but it does sound like you should consider raising prices - they should cover not only the cost of materials, labor, and fees (etsy & paypal) but also include an hourly rate for your time, and your overhead (cost of supplies, tools, taxes, utilities...). Here's a link to a good article
on how to determine what to charge. It's geared toward freelancers and self employed folks - and doesn't include anything about handmade items, but the formulas mentioned might be helpful to start figuring out where you want to be. (If you haven't already done this already). It's so important to factor all that minutia in.
Make sure too that you are getting all the tax benefits that come with running a business out of your home. I have a studio in my home and I was able to deduct a certain percentage of all our monthly utility bills because of it - I ended up hiring an accountant to handle my taxes because it got so complicated, but it has been absolutely worth it.
You may have already looked at all these things, in which case, this is not very helpful information, but I hope it might help a little - or, at the very least - you'll know that I agree with you - it can be so hard, and you are in a much more scary spot than many since you are doing this with your husband as your full time job! Money stuff just stinks. Hope your little one is feeling better very soon!