Have you considered adopting the kids? It would sure make everyone's life easier =)
As a step-parent, you are correct in that your rights are seemingly few. However, what you do have on your side is time, place (the kids are with you) and a bonded relationship these kids. If Mom were to suddenly pass, you could Petition for guardianship of them, and depending on their ages, you might just get it. Lets hope we don't need to find out for a very long time.
In California, the biological father will have priority, but with the facts you describe, you would at least have a chance of becoming the childrens' guardian. At the very least, you need to have your wife nominate you as the kids guardian of the person and estate in a written document, and have the document notarized.
Kevin L. Von Tungeln*
Thompson Von Tungeln, A P.C.
Attorney at Law
857 West Lancaster Boulevard
Lancaster, CA 93534-2348
Telephone: (661) 945-5868
Telecopier: (661) 723-7089
*Certified Specialist - Estate Planning, Trust and Probate Law
The State Bar of California Board of Legal Specialization