Speaking purely about the childrens issues, I feel it's better (even froma christian viewpoint) to send them to a public school rather than a private one. I've seen children grow up in both institutions and I feel it's better to prepare them for life with the rest of the world than segregate them.

Sending them to church won't hurt your relationship with them, they will be taught to love and respect their parents. As long as you are frank with them and don't lie, I feel you'll have fewer problems. Lying just creates timebombs later in life, especially in those teen years.

I am in a similar situation. My wife is Catholic and I am Pagan. We had some rough times at the beginning of our relationship when she kept trying to subtly convert me. we have now reached an agreement. I actually go with her to church, because I feel it important to support her in anything she wants to do. If it's important to her, it's important to me. She has also agreed to join me should I ever be involved in ritual again (usually I practice my beliefs alon, but occassionally will join others to celebrate Yule, or what-have-you).
Our first child is due in April, so we've been talking about this very topic for some time. I feel it is important to have my kids baptised. My thought is that, should they grow up Catholic, they will be happy that it was done. If they grow up Pagan (or anything else), they won't really care if it was done or not.
I feel it will be responsability as a parent to teach my child about my beliefs and also their mother's, then allow them to choose. Would I prefer to heve them follow my beliefs? Yes, I would. I think it's normal for a person to want their child to agree with them on such things. Will I be upset if they are Catholic? No. As long as they are good, decent people, I will be extremely happy. I just ask that they not judge others for being different.
On a personal level, my wife and I have resolved our different points of view fairly well. I believe in an ultimate creator-force, which has both male (God) and female (Goddess) aspects. Like many Pagans, I believe these forces manifest in many ways, including the various gods/ goddesses of ancient religions. I simply accept the Christian God as one such manifestation. He's not necessarily the one I invest my faith in, but all things and all deities are ultimately part of the same creative force.

You are Canadian are you not? I don't know how it is in Canada, but in Sydney (where both Ben and I are from) the 'Christian' private schools are generally a lot better than the public ones. (Kings, Trinity etc etc) Nothing to do with religion, and everything to do with schooling. So, careful with the 'advice' about another nations schooling.

Ben, I went to a public high school and then a private Baptist one. One thing I found was that as I was going through it, many kids rebelled against Christianity and the small amounts of doctrine we were exposed to.

There was one subject called Biblical Studies once a week, a pseudo-sermon/motvational talk once a week and that was pretty much it.

The benefit for me personally was there were other preachers kids there. You COULD be a Christian and not feel like a loner, unlike in my Public schools where derision could be commonplace.

Anyhow, many of my contemporaries rejected the church, free from condemnation too. The irony is that two of the most hardcore people against it are now for it. One guy was a Satanist at school, and he's now working full time as a social worker for the Anglican church.

So go figure. How someone is raised seems irrelevent. As Arnabas said, if they end up Christian, all the Bible stuff they get taught as a child will be invaluable. If they don't end up Christian, is it really a big deal?