For sailhandling in challenging conditions, we always preferred to have the tiny kids belowdecks. The situation you described is a good example of why it is important to have a safe place below where kids can sit securely when weather conditions or other circumstances demand the full attention of parents. In our experience, the bigger the boat the harder it is to find those places, so they normally have to be created. Lee clothes on the settees, and an athwartship leecloth on the v-berth, worked well for us when our kids were tikes. Even now that the youngest are elementary-school aged, these modifications still get a fair bit of use for naps etc.
My wife and I have different ideas about reasonable heeling angles, but I defer to her and we are the boat you see with a reefed main at 15 knots. And a partially furled genny at 18 knots. Two reefs at 22. You get the idea. Fortunately our boat sails well even undercanvassed.
But in defence of your skipper, there are many boat designs (ours is one of them) that will SAIL much more comfortably, and faster, than they will motor. In our boat, sailing to weather in 20-25 knots of wind, with the boat reefed down, is a comfortable, easily managed affair. Motoring upwind in the same conditions is another matter altogether: Pure misery, and SLOW! We empirically proved this many times when the boat was new to us. Fortunately we eventually gave the boat a chance to demonstrate its prowess in adverse conditions. My only point is that there are some circumstances when dropping sails and motoring is neither the best nor safest answer.
Then again, sometimes it is. In general, with young kids aboard, the more conservative approach should be the default.