It looks like you have thought this all out carefully with the numbers. Yes, it can work. As others have said, and you well know, you do have to pay back the HELOC and the interest is no longer tax deductible. It may be useful to check up refinancing your house with a cash out mortgage. Do check carefully on what the interest, tax deduction, monthly payment issues are with such a move vs a HELOC. The tax implications of these things are complicated but if you find someone who can wade through them, it may be beneficial.
Look at the various loan options–the Direct loans that the kids can take each year starting with $5500 freshman year, and what the PLUS loans for parents have in the way of interest rates.
Nothing wrong with loans or dipping into 401K and other plans as long as you know the ramifications of doing so.