Well, I am probably a little late here, but here is my two cents. I also live with a woman and have for the past 3 years, though neither of us has children. We have both worked full time, gone to school part time, and probably been part time mates also, due to hectic schedules. We have made the best of the relationship as possible, I believe. Now things are settling down, she is finished with school, and I am seriously considering marriage. If I were in your shoes (and in many ways I am), I would do the following:
1. It sounds like you do not wish to sue, so determine whether or not you even wish to work in that environment. Regardless of this decision, you need to report this to the next in line or higher. I definitely agree with the statement that legal or illegal, meddling in someone else's private life in the workplace is never a desireable trait, in a coworker or a boss.
2. Get married if you know in your heart that it is what you want. It seems to me that there are a lot of "preachers in the house". Last I checked, living together out of wedlock is not one of the 10 commandments, and even if it is frowned upon, they teach us that "God is all knowing and all forgiving, so I wouldn't fret." So, I say to you that if you decide to get married and live happily ever after, you played your cards right. If you don't get married, again, you saved the church and a lot of people a lot of wasted time for what inevitably would have ended up as a divorce. Finally, good luck no matter what roads you pursue in both the employment and personal side of this discussion.