I agree with you - that scenario would have grossed me out too. I think, if a polite way was available, I'd have left as soon as I realized the kids were staying. But I could see me staying and thinking the same as you too - I just HOPE that I would have left!
We've NEVER been put into the position you were put in. I think you handled things as well as many would have.
I agree with the number of smokers in this lifestyle too - I'm a 'reformed' smoker (it's been 20 years!!!) and my hubby has never smoked. We've been forced outside to breathe a time or two also. BUT.. we put up with the extensive smoking because we enjoy the lifestyle.
After a few weeks look back on this situation and see if you are still thinking 'burn out' instead of 'gross out'. Things should be in perspective by then!
Good luck.
Mrs. FLKeys