But if you apply for a spouse visa for your husband, does that mean he has a further 2 years to go to get ILR?
Yes, that is quite correct!" It is crazy that if one is out the country and have been married for longer than 4 years, you can apply for ILE, however it appears the only option if you are in the UK is to apply for a spousal visa! Madness. There doesn't appear to be any provision for those already in the UK who's circumstances change like our did.
There are provisions for granting ILR outside the Immigration Rules. But not a do-it-yourself area. With respect, it seems you haven't hired an expert on "out-of-policy" cases to review both your spouse's case and whether the HO applied due process in refusing your children's citizenship applications.
Strssful, if that's the case, you're making a mistake, IMHO.
You can read all the Home Office policy instructions here (other than for a few restricted sections):
But there are limits to what a single person can achieve compared to an expert who handles cases like yours every day. The only additional pointer I'd make is that anecdotally, many immigration advisers don't have the experience (or exposure to nationality issues) to add much value, you need to find one that does.