How to deal with rampant badmouthing to kids by ex-wife?

Apparently for her, she does not have the kids best interest in mind. It would also appear so is not a person you could set down with and reason with on issues involving the kids. I think you are doing the right thing by taking the high road. I think it also important that you stay consistant to your word and actions as it pertains to other matters that they witness. As they get older, they will see that you are consistent in your actions and that you are a responsible parent. They will also get tire of hearing the bitterness from their mom and start to question her. This will be the time you will start to rise to the top in their minds. Your older daughter can be your best ambador. I think you need to maintain a solid relationship with her and be honest with her about any questions she may have as it pertains to your divorce. Young children can not rationalize good enough to understand the issues but your old daughter can, and you should keep an open line of communication with her. After all, she could end up going down the same path with her life. I think it is important that she understand that it takes two, it takes compromise and it takes a willingness to work with your partner in order to have a fulfilling and fruitful life. Remember, her little sister will look up to her and will believe what she says because most younger siblings want to be like their older siblings. This gives you the power their mom can not do anything about. If she starts to blast her, then the younger one will start doubting the mom. All I can say is stay strong, be all you can be, and be there for them. Good luck and I hope this helps.