There is much more to it than just the school work. She dictates to them what they are allowed to say on the phone,
I tell my 5 year old what to say on the phone too. Otherwise, he'd just walk around the house, babbling about random junk.
she doesn't allow them to take their own toys to my house,
I wouldn't either. I have a 14 year old and an 11 year old and I don't let them take anything special or important or expensive to their Dad's house. Never have. He wants them to have nice stuff there, he can buy it.
yells at them if they return to her house wearing something she doesn't like,
Yup. Happens to my kids to. On the other end. They get grounded at Dad's for hanging out with friends he doesn't like on my time. They're used to it.
she tells them that dad's house is bad, that my current wife is bad, that she wishes our baby would die.
Crappy. Not a reason to change custody.
The list goes on and on. Each item on its own my not seem harmful, but I can already recognize a change of the children's behavior around some of these issues. She is mentally screwing them up, and it seems as if there is nothing I can do about it because she has sole custody.
There wouldn't be anything you could do about it with joint custody either. Does that make you feel better?
You split up when the kids were REALLY young. And it's going to be VERY hard to tell, over the next few years, how much of their behavior is because of the divorce or Mom's behavior, or growing up. My kids were around the same age when I divorced. It was REALLY HARD for 4 or 5 years. Now? Easy peasy. They're FINE and you wouldn't believe the hell my ex and his wife put them through.
I agreed to the sole custody under recommendation of my lawyer at that time. I had no idea, and did not explain, what kind of power that would give her. I would have never agreed to that if it were explained properly.
Doesn't matter. You agreed.