Your children and you will suffer just as much if you two break up, whether or not you were legally married. I don't entirely agree with her approach. If marriage was important to her, why did she have children with you first? I think its pretty selfish and unfair on her part to threaten to break up the family if you don't marry her. Hence, why I don't advise getting pregnant if marriage is your goal.
That being said, I understand her desire to be married, especially since you two have kids. I think it is just as selfish on your part not to marry her and risk splitting up your family. It is selfish to your kids and selfish to her. Again, I don't agree with her threats, but c'Mon! She gave you two kids! Just marry her. I wouldn't let her coerce you into a huge expensive wedding or diamond ring if you can't afford it, bit she is taking care of your kids and acting as your wife. Time to face tour fears. At this point if you two break up it will be similar to a divorce. She can still sue you for child support and there will be custody to work out and lawyers and courts may be involved. So you aren't saving yourself that much headache by refusing to marry her.
Your fears are valid, so talk to her. What would help you feel more secure? Do you two need to attend counseling or work on co-parenting more? Are there some major problems that you need to work on before you feel more confident? Talk to her and see where compromises can be made.