You are all going to be fine, you're in a great position with lots of savings and assets! This is a disaster scenario for those living paycheck to paycheck, not for your family. Answering your original question, personally I would stop contributing to 401K and keep the extra money. If all goes perfectly, you have plenty of time to add it back in to your 401k this year with the new job. If not, you'll want the extra cash on hand.
Maybe it would help your peace of mind if you both came up with a timeline plan depending on how long the job hunt continues. You have plenty of ideas, but ordering them step-by-step might help reduce your anxiety.
I mean something like this:
Month 1-3: live off savings in account x, gather all financial info and expenses and forecast out, reduce expenses, husband applies to good prospects
Month 4-5: husband applies to all prospects, contract work, etc; begin steps to sell rental
Month 6: you apply for flexible or part-time jobs, while husband is home with kids (any money coming in reduces money from savings). Flexibility is key, so husband can still go to interviews or do contract work (or build up his own business if possible).
Month y: consider moving to LCOL area and you working full time.
Etc.
Not that I think it is likely for things to progress to that extreme, but having it all in writing means you are both on the same page and have everything in place before panic sets in. This also requires you to have gathered all the information you can, including what penalties you will pay for accessing money in places like retirement accounts, CDs, etc. so you know when to take a more drastic step before that has to happen.
One other thought: Don't sell yourself short. You have marketable skills, you're just not in a position to command a crazy high income (similar to myself and most people in this country). That does not mean you have no skills. Use what you have, there's nothing wrong with working regular income positions to support your family even if it is a fraction of what his salary was. And you're already in a great position to handle a lower income, with frugal habits and low expenses. In my field, I would never ever make close to what my husband already does, so I am the SAHP. And we've been spoiled by his above-average salary. But if he loses his job, I will go back to work in a heartbeat in any position I can find in or out of my field, because that wage is still way above zero. Consider starting with part-time work in retail, as a secretary, in childcare, at a library, at a university, whoever will hire you. Start thinking about it now and make it part of your plan. And smile, you are well prepared and everything is going to be fine!