You didn't go on too long.
I have less work than you, as I am not in school. Yes, I work when my children are awake. There isn't much other time, because they don't take naps anymore (ages 3 to 8) and my husband wants me to spend time with him after they go to bed for about an hour. I proofread articles for a magazine online while my children play. If they're not hurting each other or otherwise fighting, and they've been fed, I don't see a problem with it. I see it as a break from them. It sounds like you're spending time with them already and still getting chores done.
May God bless you and His Blessed Mother Mary keep you! :-)
My days of having a 2 to 3.5 yo in the house is long gone (unless you count grandchildren who range from almost 9 to 2 months) but when I did, I worked while they were awake whether it was paid work or house work/chores or just reading a book. I've never taken the view (just my personality, not an indictment of other mothers' way of parenting) that I needed to interact with my children the majority of their waking hours past the newborn/infant stage. I was always available when needed but otherwise they had their thing and I had mine even if we were right next to each other. When I'm watching the grandchildren, I'm often working (except for the baby) while they are entertaining themselves.
I don't have tiny kids in the house anymore, but my kids were younger when I started school. I think my son was 7, DD1 was 5 and DD2 was 3. I also homeschooled my 7 year old. And yes, I studied when they were awake! I was wiped out by the time they went to bed. Way too tired to study. I don't think you need to spend every waking moment productively with children. It's about the quality of your time with them, not the quantity. As for "doing something productive" when the kids are playing- like housework, let that go. I had to let that go a long time ago. My priorities are kids, school and the part time, work from home job I have now. Then there's housework. I ignore people who try to make me feel guilty. I was also clear with my husband that I needed help and all he asks is that I let him know what needs to be done. It works for us, the house stays reasonable, the kids are happy, a make good grades and bring in a bit extra with working. I am in school part time and just a couple semester away from my BA now (I took a couple breaks... including to work out of the home for 6 months).
It sounds like you have a good balance between everything. Really, other people don't get to live your life so you should just let their opinions slide off your back, if you can. They aren't worth worrying about. FWIW, I always HATED playing along side kids. I was so happy when they got old enough to play games because I could play Uno or memory all day. But I was terrible at playing My Little Pony, Barbie or pretend games. I found them a bit tedious. ;) I thought that's why we had multiple kids, so they could play with each other.
When my kids were that age, I didn't work unless they were either sleeping or being cared for by DH. But I don't see a problem with it as long as their needs are being met. If your kids are good independent players, it's fine to take advantage of those pockets of time when you can get some work done. It's hard for me to pop in and out of work mode -- I need an extended time when I can focus intensely, so I preferred to just wait until I knew I had a few solid hours of peace, rather than trying to squeeze a few minutes in and then getting frustrated with the kids if they interrupted me.
These days, my kids are older (5 and 9), so they're fine playing on their own for a while, and I do work while they do homework or play on their own after school. (And, since they're both in school now, I have lots of quiet time during the day which is a HUGE help, even though DD is only gone for 3.5 hours a day for kindergarten. Next year when she's in first grade I'll hardly have to work at night at all -- I can't wait!!!) It helps that these days their interruptions are more likely to be calm questions rather than giant melt downs, so I'm able to answer them and get right back to work without losing too much focus.
I have a very supportive partner, though, who makes it possible for me to get lots of work done during the day so I don't have to stay up too late at night. He goes to work early so he can be home mid-afternoon and play with the kids while I work, and he does the bedtime routine so that I can get more work done and still have time to hang out with DH before we go to bed.
Oh Angela, I wish I could tell you it was a cake walk. Unfortunately it isn't. It takes you a while before you can figure out a balance that works for you and your family. I wish there was a one shot solution that works for all parents. I can say this though, it'll get easier when your kids are older and a bit more independent. I managed it with a mix of group activities - we have a community of moms and grandmoms and for a few hours every week, they go out together to the park or to someones house so every mum gets some respite. I also discovered some amazing educational activities for toddlers that I knew my kids would love (DS loved this space based math game but DD prefers crafts and so I bought her a project based craft book). I think at the end of the day, what it comes down to is time management. If you could work early mornings and during their nap times, you could also go to bed early at the same time as your kids. I wish I could be of more help. Never forget what a wonderful job you're doing! Hang in there!