Where is the source that states that if Kibud Av Ve'em contradicts with Shalom Bayis, then shalom bayis overides the kibud av veem? I am talking to the extent of divorce!

There is no universal principle that declares shalom bayit (=marital harmony) more important than kibud av v’eim (=honoring one’s father and mother). You are however probably referring to Rambam Hilchot Ishut 13, 14 and to Shulchan Aruch Even HaEzer 74, 9-10 where the halacha is that neither a husband nor wife can force their spouse to allow “the parents” to move in (or sometimes even to visit) with them. The R’ma writes that if a wife claims that her in-laws’ presence is impossible because they fight with her, the beit din appoints a representative to go to the home and determine who is responsible for the fighting. IF THERE IS A DANGER OF DIVORCE YOU ARE NOT TALKING ABOUT A HALACHIC PROBLEM AND KNOWING THE HALACHA WILL NOT SOLVE THE PROBLEM. If everything else other than this halachic question were fine, the halachic issue could be resolved without the threat of divorce. If you are interested in preserving the marriage- and I assume from the question that you are- you and your wife should contact a professional marriage counselor without delay.