First of all, I am very happy that you saw the truth on your own at the age of 16. And alhamdulillah, Allah has accepted your sincere duwa when you asked Him to guide you back to the deen, and you are now learning to pray and teaching your son to pray. Alhamdulillah. That is why in the beginning of every Jummah, the Imam says, whomsoever Allah guides, none can misguide him, and whomsoever Allah misguides, none can guide him. We ask that may Allah guide your wife, and may He raise all your children as Muslim.
Now about your decision to divorce her, it seems this has nothing to do with her being a non-Muslim, but it has everything to do with arguments, fights, disrespecting each other, etc. A lot of Muslim couples go through the same. But you said you love your wife. So I think what you should first seek is marital counselling. Muslim couples, non-Muslim couples, mixed faith couples, everyone could go through the same kind of low points in relationships. The important thing is to work to mend relations and to seek help - in this case the help of a trained marital counsellor. If you know that your local mosque offers counselling services for couples, try that. If not, then you can go for a professional counsellor.
My request is, dear brother, do not deprive your children of a mother and father and make them grow up in a broken family. The children will never forgive you or their mother if this were to happen.
Secondly, it seems to me that your wife has not learnt or been informed about what Islam really means. She looks at the rituals and obligations - like the hijaab, prayer or the shariah permissibility for second marriage; but it seems she doesn't know what Islam really is - that is Tauheed, to worship the Creator purely and not to put anything between the creator and creation. May be, you should make an appointment with a learned scholar in your local mosque to give her a presentation about the Oneness of God and what the core beliefs of Islam are - with lesser emphasis on the rituals and practices. Remember, there is a Hadith which says that if Allah had revealed the prohibition of alcohol and adultery first, then nobody would have given up alcohol or adultery. But Allah revealed the belief in Tauheed first, and once someone understands and believes in God's oneness, then following Islamic commandments come naturally out of a desire to please the Creator.
I will give you a very interesting experience I had 4 days ago alhamdulillah, this past Wednesday. I met a 28 y.o. african American nurse lady who had e-mailed our mosque saying she is interested to learn about Islam. So she came to the mosque to learn about God and the Islamic faith. I also invited some Muslim sisters to this discussion. I talked to her for 2 hours mainly about Islamic beliefs, Tauheed, Quran, the Prophets, but not much about rituals and obligations. She was really interested. After about 90 minutes she asked me, what is the next step one needs to take to come closer to God. I said the next step is if you believe in the Oneness of God, then declare it. She said she is ready, subhanallah!!! I asked her again, are you sure? She said yes. Then alhamdulillah, she said the shahadah and became Muslim. The point is, (without me or the Muslim sisters who talked to her taking any credit for her conversion, because we know it is Allah who Only guides and not us), if the truth of Islam is presented to a person in a beautiful way, then people are willing to accept. Because Allah says, there is no compulsion in religion SINCE the truth stands out distinctly from falsehood [2:256].
So you may not have hope, but I am saying there is hope. Have someone knowledgable talk to your wife about what Tauheed and oneness of God is. And inshallah, inshallah, Allah will guide her.
Finally, even if your wife does not accept Islam, please teach your young children about Surah Ikhlas and tauheed. Once they know and understand this, inshallah they'll never ever accept any faith other than Islam. Here's a khutbah I gave a year and half back on it, you may listen to it to know what to teach your children inshallah. Miraculous nature of the Oneness of God (khutbah):http://www.youtube.com/watch?v=pCDFQ3f1OA4#http://www.youtube.com/watch?v=OzhmZnBbJpU&feature=related#http://www.youtube.com/watch?v=gouV66r-MZs&feature=related#
One more thing, I hope your wife was not just any non-Muslim but a Christian or Jew when you married her. Because, otherwise, the marriage would be not valid Islamically anyways. Just saying to make sure that the marriage fell within what is halal.