Divorce

You have wasted  a lot of time, if going for divorce was what you were looking for.

The procedure would be simple.

This is a case of desertion, you can file a divorce petition based on desertion and mental illness of the spouse.

Send a legal notice via lawyer, asking her to come  back, failing which you will state that you will have to go to the court asking for divorce.

That's No. 1.

Another option is, sit with her and talk to her, that you want divorce, as you both have to roam to court halls for years together, want to avoid that?  Ask her to agree for MCD, also talk about the children's custody then and there itself, MCD should include the points about who will look after the kids, [as she does not seem to show any interest in looking after the kids, its better that you continue with the current set up of your parents and you looking after the kids] of course with child visitation rights if she ever wants to come and see the kids. Also have a talk with her about permanent alimony, one shot payment to her, if she is asking for a price for agreeing for MCD.  

Another option for you would be,

To sit and think about the future.  As you have stated she has deserted you under the pretext of her father passing away etc, she becoming sick in her mind due to this.  You might also want to marry again in the future, if you have decided to take divorce, in such case your options will be limited as good as none.  

If you still think that you want to give it another try, try sorting out things, try looking at things as to where what went wrong and try fixing it, remember you got two kids, kids need both parents.  If you think medical attention would be of help, then, try getting your wife get some psychiatric help and couselling.