U.
Erica,
I'm just sending you a hug and I want you to know that you're not alone in feeling these things. We all feel this way at some point. Remember that you can love your husband through this time, but you cannot cure him of stress. That is his and your kids don't need you to inherit it from him.
Both of you being stressed out b/c one of you is stressed out is just not helpful. But I know where you're coming from. Be sweet. Be a friend, but don't take on his stress.
As far as the schedule is, children that age need between 12-14 hours of sleep a day, more for the 1 year old. Get them up when you think is convenient for you and FORCE them to lay down when you think it is time. You can't give kids options about bedtime. They will be better behaved, better balanced, happier kids if they get enough sleep. It might take a week or two but you will never regret getting them into a good pattern. Even if it takes hours for them to fall asleep the first couple of nights, make no allowances! They'll catch on, and their bodies will thank you for it.
Be disciplined about your own sleep, too.
Good luck to you and remember: This too shall pass.