This is a tough one. It is difficult to say to someone who they can and cannot have a relationship with. That is really their own decision. HOwever, if there are issues on how that relationship may be affecting your partner and how those issues are affecting the relationship then you DO have the right to comment.
HOw can someone have a relatoisnhip with their abuser? If that person is a family member you have to keep in mind that all too often the acknowledgement of the abuse that person inflicted on you could very well result in teh complete cessation of that relationship, which is a very scary prospect. Many survivors of abuse have intense abandonment fears which are triggered when the survivor makes moves to remove a toxic relationship from their lives. While intellectually it may seem very easy for someone to just cut the abuser out of their lives, in reality it is very difficult. It takes the acknowledgement of the abuse, and the associated feelings of shame, grief, etc. in order to make that move. Maybe your wife is just not ready for that yet.
Also there is the whole issue of what trauma can do to someones brain. I have heard stories of 40+ year old victims of S.A. who still are easy prey for their perpetrators even though they are now adults. Someting about the trauma literally re-wires one's brain and some traumatized people just cannot see themselves as anything other than a victimized child.
With respect to this person having involvement in your childrens' lives - I think this is one area in which you DO and MUST have some say in what happens. As a parent you very much DO have the right to restrict people and things from your kids' lives whom you think may harm them. This may be one area in which you could exert some influence over the situation - state to your wife that you dont agree with the relationship that she has with her father because of their abuse history, however you do have to acknowledge she is an adult and has free choice, but you could say that you will NOT tolerate an abuser having contact with your kids. This may generate a conflict within your relaitoship but your kids are worth protecting!!!!!!!!
P