my cat is so unhappy since we brought home new kitten

Quick history, my resident cat, Max is about 5 years old, male, and I brought him home as a kitten and I already had a female cat. She didn't like him at first and hissed at him a few times but it didn't take long for them to become close friends. Fast forward to January 2014, my original female kitty died of kindney failure, she was 11 and Max became the only cat of the house until about 3 weeks ago we got a female kitten. I thought he would be happy to have a companion again but he is NOT. I knew it would take time for him to get used to her, but he still hisses at her and not quite growls, but "angrily meows" at her and avoids her like the plague. He is overall very grumpy now and always looks mad. He also has NO tolerance for my kids anymore, (where he used to be great and they could carry him around and pet him all the time) if they try to pet him he does his very angry meow and sometimes hisses and swats at them. He sounds so mad I'm worried the way he acts he's going to lash out (trying to avoid the word attack, but..) and might seriously scratch them and maybe even bite them. I feel bad he's so cranky now and I was just hoping for some advice/opinions? Thank you!

A couple important things I forgot to mention, the kitten is super friendly and all she wants is to play with Max, she is not aggressive at all. And also Max still tolerates me and my husband, we can pick him up and pet him and he purrs. He only gets pissed towards me if I'm holding the kitten or if she is really close by when I approach him.

I heard there was an episode of the cat wisperer (not sure what channel) where they had this situation.  The solution had something to do with keep them apart, then reintroducing the new cat by smell only first.  I think they would feed them on opposite sides of the door, so the old cat could smell the new one under the door, but not see.  The old cat likes food, so maybe starts to associates things he likes with the kitten smell.

Hey! I just had a lot of success introducing a kitten to the cat I've been sitting, and all of the resources basically say the same thing, so give this a read!

http://www.humanesociety.org/animals/cats/tips/introducing_new_cat.html

Some things on top of the articles I'd like to add: It really, really depends on your cat!!

The 2 year old cat I've been sitting is super friendly and loves to play, but not with toys. He needs 45 mins of hands on attention and we hadn't been able to give that to him. He'd been bored and getting into things - signs that he needs more stimulation. I thought he would love a playful kitten to occupy his time, and eventually he did - but the first day he hissed and was VERY aggressive! We'd had him 2 or 3 months before that and had never seen him be so mean! This is the cat that cries if we lock him out of the bedroom!

So the first day we kept them in separate rooms with their food next to each other. Once Mona had settled in (she was relaxed even with the larger, angry cat hissing in her face) I did a few switcharoos and noted his reaction. He was very hyper, as if angry and looking to vent. But after a few minutes he was able to relax and play a little - though not normally.

So questions you have to answer:
1. Does he look scared or angry? Territorial or insecure are very different feelings! Territorial may take weeks and many switcheroos to work out, as well as extra attention to make sure he feels loved and not replaced. Wolf almost seems scared, so I spent the first night in the living room.
2. What is his favourite thing? Wolf loves to wrestle over all else! We brought him into the bedroom (Mona's room) so he would be the intruder the second day. He had a harness on (story on the harness - Wolf did not like the outdoors as much as he thought he would) and we had a lot of control over him while Mona watched. Then she went to bat his tail and there was an incredible shift in demeanor! He literally would not leave her alone after that, to the point of being too much for her. I had to separate them for naps, and I slept in the living room again....
 

Some other tricks we used - Wolf would never be aggressive towards us so we carried Mona into his space and lured him with his second favourite thing - wet food. This gave him control and let him make the decisions - be mean or get food? Cats love choices, and giving them as many as possible (even hard ones) really helps them relax.

Anyways, good luck with your kitties! Habitual and stubborn as they are, having a friend is usually a really good thing!

@erikainak, it really is rare for cats to immediately get on, especially when one is the established cat and along comes a newcomer!

I would suggest starting over, using the techniques for introduction.  We have a good, clear explanation of the process here: http://www.thecatsite.com/a/introducing-cats-to-cats

Let us know how you get on.