You're not out of line to have your own standards and boundaries of what is acceptable. We all have our own and part of finding a partner that is right for us is finding someone whose own standards and boundaries compliment our own. If it's outside what's acceptable then it is. You can't fake accepting a situation that's not acceptable to you; you can go along like that for a while, but eventually, it becomes too much. I think it would be fair to say you're far from alone in not seeing this as acceptable.

I think it's only right that you tell her this is a deal breaker. Don't expect her to change her arrangement though, and realize that if she changes her situation for you, she may ultimately resent it, just as you are with adapting your standards for her. You might help her see this from your point of view by asking her to think about how she'd feel in the reverse situation -- with you living with your ex. it may help her see this from your position.

I understand you have feelings for her, but you might also consider that ultimately this may be a good thing. Continuing a relationship with her means continuing to deal with her ex and how she chooses to handle him. If it's not an acceptable manner to you, staying together would mean a a life of problems; since they have a child, he'll be in her life always.