This does not strike me as a relationship that can work.
And certainly it is not a relationship where (as accurately identified by Norman B) having children should be considered.
What amuses me is that I think Norman B already knows the answer here - that this is a relationship which will not work - indeed, he doesn't appear to nearly have the patience and "social work" skills required to deal with this spouse. This doesn't mean he is a bad guy, but dealing with her is not in his wheelhouse of skills (it would not be in mine, either). But he sure as heck wants other runners to agree with him. Forget it, get mentally tough and rigorous on the issue (as I suspect Norman B already has), make a decision, move forward, and deal with the guilt quickly and view it as part of the territory. And you will not need approval from others.
Note that the lack of intimacy is a huge problem - no good marriage can exist without it - and women in particular often become delusional on this point - and the fact that it has occurred two years in is simply disastrous. Trust me - at age 50 this would be a huge problem - and would likely lead to affairs and other acting out behavior which causes nothing but trouble and would drag everyone down.
The other factor here is that if you do want kids - you are spinning in circles with this woman because she will not be a good partner - even if somehow she is a good mother - she will not be a good partner to you and that is what the kids will see - again, this is a disaster. Move on, and do it your own way.