If the OP has to ask her husband for a cut of the profits from the sale of the house he shared with his daughter’s mother it sounds like he thinks the money is for his daughter’s college expenses. If he thought it was a shared asset she wouldn’t have to “get” him to give her kids 75% of the profits.
It doesn’t matter that anything the dad has will be counted against OP’s children on the CSS. Anything owned by the OP and her ex will count against the stepdaughter. That’s the way it works.
And I don’t think it matters whether the stepdaughter’s mom left the house directly to her daughter or not. Her intent surely wasn’t to give 75% of the value to someone else’s children. But ownership of the house matters. If OP owns a share of the house or helped pay the mortgage then some of the profits fall into the assets acquired after marriage part of their agreement. OP hasn’t been clear about that or by what she means by the house was “technically” his.
It sounds like the stepdaughter needs the money to attend an OOS college where her mom and dad’s families still live. OP’s reasoning is that her stepdaughter is eligible for lots of merit so the money should be split so her kids have an amount similar to what her stepdaughter earned. But large merit doesn’t usually come from OOS schools. So when she talks about financially supporting one dream over another it sounds like she’s talking about using the money from her husband’s asset to pay for her daughters’ dream (private) schools at the expense of her stepdaughter’s dream of attending an OOS college. If that’s the case I think she needs to be really clear about whose asset the house was. If it belonged wholly to the dad and his late wife then I don’t think it’s right for OP to take 3/4 of the profits for her own children.