Is it permissible to divorce a Kitābīyah wife who refused to embrace Islam and renounced moving in with her husband for fear of being forced into what she dislikes, and what are the implications of that for raising the children, and is it obligatory to obey one's parents regarding divorce?

Marriage to a chaste Kitabiyyah (woman of the People of the Book) is permissible, provided the conditions for a valid marriage are met, but it is disliked due to the possibility of encountering religious prohibitions. The Kitabiyyah wife must embrace Islam, and she does not have the right to refuse moving to her husband's place of residence; otherwise, she would be considered disobedient (nashiz). If the parents command divorcing her, and you fear that the child might be raised outside of Islam, then obedience to them is not obligatory. Strive to appease them.