Dealing with the stress of caring for a parent in your home.

It is understandable that your wife wants to keep her promise to her dad, no matter the sacrifice.  At least at the present time, she is not likely to be persuaded by the idea that the cost has gotten too high.  She may feel that to go back on her promise would be very costly too, in terms of guilt, reduced sense of integrity, self-worth, and self-esteem.  Placing him in a nursing home would never be a happy choice, but she might be able to see eventually that it is not in his best interests to remain in the present situation.  It would have to seem to her like an improvement for him, in terms of his health and happiness.

I don't know what the type or degree of his dementia, or the long term prognosis, according to his doctors.  But from what you say, his personality has changed, and he is not the same person that he was when she made that promise to him.  I don't think that she will want to consider that as a reason to change her commitment to keeping him at home.  But as it progresses, it might be one of the factors in realizing that he would get better, or at least more specialized, care in another environment.

She is increasingly overwhelmed, depressed, and irritable.  She feels guilty when you do persuade her to get out of the house and do something together.  She might feel less guilty if there was someone else there with him, whom she could trust to give him good care.  It could be worthwhile to investigate the availability of home health care and respite services, so that the entire burden does not fall on her shoulders.  If and when the home service providers say that they are no longer able to provide the care he needs, it would be another powerful piece of evidence that the present situation is not the best for him.

Seeing a therapist for individual counseling might help her come to terms with her own limits, as well as her sense of guilt, as she considers other possible solutions.  This is also causing a great strain in your marriage, to the point it might end in divorce.  Marriage counseling might help you to see each other's perspectives and understand each other's feelings.  It could help you communicate more clearly with each other, in a supportive and less pressurized setting,  Rather than issuing ultimatums, you could both focus on the consequences of continuing as things are.  You could also agree on short term goals, and make their implementation part of your relationship contract for a specified period of time, after which you would talk again about how it is working, and whether other changes need to be made.

Best wishes to both of you in this very difficult situation.