The most important thing is that you have your children evaluated.
Your children were around this offender, and he may very well have had opportunities to abuse them. Have them evaluated by a professional immediately to see whether or not they've been harmed or exposed to indecency in any way.
You need this to be done by a professional that is trained in talking to children about these subjects. Most people's instincts when talking to children about sexual abuse are wrong, and may make it harder to get the truth.
Remove your children from the situation
Right now, the most reasonable course of action is to not have your children be around the house you spoke of, or your husband's family. There are just too many unknowns. How, if at all, were each of them complicit in this activity? You can't know, and as such you can't trust your children to be alone around any of them.
You may also decide to take the same stance with your partner. David Boshton and RachelD both have very valid stances on this matter. David has great suggestions for boundaries if you decide to stay with your partner at this time. RachelD suggests immediately taking yourself and the children to another place to live for the time being. Both are completely reasonable options, based on the information we've been given.
Why did your partner keep silent?
Shame is tied to childhood sexual abuse, and there are other mental health effects and coping mechanisms that come of it (self-blame, denial, confusion, and more). It's not acceptable that he put your children at risk, but in his mind he probably wasn't capable of thinking like that.
Unfortunately, there's very little research regarding male victims of childhood sexual abuse, as opposed to female victims. We can only speculate as to his state of mind.
What this means is that your partner needs professional assistance, as others have already pointed out in comments.
It's not clear where you found the offending photos (whose computer were they on?), so it's not clear to me which further actions should be taken regarding your partner (besides either David Boshton's or RachelD's suggestions).
He needs help, no matter what.
You shouldn't blame yourself
It's nothing about you that kept your partner from speaking up. He's dealing with a very severe type of childhood trauma that our society isn't comfortable acknowledging.
You also did the right thing by being proactive. When you suspected something was off you investigated those suspicions. It would have been far worse if you didn't trust your feelings.
It's a horrible situation, but you have done well. Sadly, not everyone exhibits the same level of follow-through, to the detriment of their children.