Dear little Sister, AA
Historically, there were several women that embraced Islam in Makkah while their husbands remained pagan. Since Muslims were being persecuted in Makkah, these women often sought asylum in Madinah. In such cases, the exalted Prophet and the Sahaba Kiraam used to arrange their marriage to Muslim men in Madinah with the women's consent. Their husbands or the respective tribes in Makkah were duly informed of the new marriage. Then, there were only two pagan women who had immigrated to Madinah with their believing husbands. They were given the option to reject idol worship or to get escorted back to their tribe with a divorce deed. Both of them chose to become Muslims.
There are numerous areas left open in the Qur'an for changing times and circumstances. Some issues benefit from the "Grandfather Clause".
4:22 Do not marry women whom your fathers ever married except what has already happened. Doing such was certainly a shameful and abominable custom.
4:23 The following women are prohibited for you in marriage: Your mothers, daughters, sisters, father's sisters, mother's sisters, brother's daughters, sister's daughters, foster-mothers who have ever nursed you, foster-sisters, your wives' mothers, your step-daughters, unless you have divorced their mother without being intimate with her. Also forbidden are women who have ever been the wives of your sons. You are not allowed to keep two sisters in wedlock at one time except what has already happened in the past. God is Forgiving, Merciful.
A couple married for 10 years may benefit from the Grandfather Clause---"except what has already happened in the past"---they have already been married.
In the case of your lady friend, divorce may not be the indispensable option. About the kids, the couple should amicably resolve the matter between them, and they can if they sincerely love each other. Since Christianity (like Hinduism, Buddhism, Baha'i Religion, Sikhism, Jain-Mat and almost all other religions) leaves the doors open much wider in marital and family affairs, I think the husband should let the wife raise the children as Muslims.
CAUTION: Please remember that the impossible Mullah loves to make things impossible. He would love to distort and emphasize on the historical accounts (distorted) given above.