I think your lingering romantic feelings for her could be clouding your judgement here.
You miss her. I get that. But here's your current goals and behaviors you list in your post. Could examine it through the lens of "What behavior am I choosing that supports my goal? What behavior does not?"
- We buried the hatchet, made peace, like her and the kids and want to be friendly.
- Hubby and I are not interested in anymore drama or lies being told.
- We are not interested in a second or a serious gf relationship at this point.
- We want to shut her out sexually and keep her at arms length.
- You invite the ex-gf for a sleepovers. (caution ahead!)
- If in guest room or couch? (Great. Friend zone. Supports arm's length. Supports less drama.)
- In your bed?. (This is not friend zone behavior. Could lead to drama.Not honest with yourself or her if goals is friend only. )
- DH opts out of the next cuddle sleepover not wanting to lead her on. (Support less drama, supports arm distance.)
- Ex-Gf gets upset and leaves. This is you and DH protecting yourselves from drama and misunderstandings HOW? Have you...
- Communicated your boundaries and goals to the exGF clearly and honestly? (Did you set her up with mixed message or was that her own faulty expectation alone?)
- Is she honoring your boundaries/goals even after being told them? (Can't control her behavior, CAN control hanging around with her)
- Are YOU honoring your own boundaries/goals? (Could control your own behavior.)
If she is not looking out for her own best healths by not accepting mixed messages from you and asking you to clarify first -- that's on her.
But you and DH do not seem to be choosing behavior consistent with your goals all the time here. That is on YOU two.
Everyone has to hold their own baggage. Inviting ex-gf now friend into bed is giving her mixed message. You are giving YOU mixed messages like that and not giving you the environment you need to stop missing her as a GF and open yourself to her as a friend only.
- You could apologize to her for giving mixed messages and clarify that you want to be only friends and keep it in the friend zone. Could ask her to call you into account if you move out of the friend zone unaware. Could do same for her.
- You could consistently choose behavior (in words and actions) that helps move you forward toward your goals instead.
If the goal has changed (ex: "get back together with my ex") that's another story and you could have to re-evaluate.
But if those are the goal? The bottom line?
You could maintain good boundaries, could not send mixed messages, could keep your own
behavior in the friend zone, could call her into account if she does not keep her expectations/behavior in the friend zone and you could not invite her into your bed at all.
Cuddles or casual sex -- you don't do that with friend only people.