I totally understand what you are feeling right now... I am in the same place. And it sucks arse.

I don't have any magical words of wisdom. I am trying to muddle through it and just let go of some things. Letting the housework go a bit to be there for DD1 - her behaviour is so bad at the moment, and I know WHY - she is just desperate for my attention and for me to play with her... It is so hard to do when I have to feed DD2 and amuse her as well now she is walking it is only 10 times harder as she gets into everything and disrupts anything I try to do with DD1...

Anyway, you are not alone! DH and I are considering getting a nanny for a few hours a day, to help me get the stuff done AND have time to give DD1 the attention she deserves and is sorely missing. And I need to work on how I handle her, I bought a book Positive Discipline and it is really helping me change my perception of her behaviour, and by extension, how I deal with it. Which makes me feel better and like I am making some headway (a little bit of confidence goes a long way to helping you feel in control).
BUT you aren't a failure, you are doing your best and we are all guilty of knowing we could have done things better or differently, and the very fact you can recognise some things are out of whack, means you can work on getting the priorities right and trying to get back some control.

FWIW, I have a whole new respect for mums of 4, 5 or more kids now - I am drowning and only have 2! I don't know how they do it. You are not alone xx