What term would you prefer he use? "Offspring"? "Biological children"? I agree that he is in no way a father in the same sense as others who have actually helped raise children, but I also don't think he's claiming to be, and his phrasing makes sense to me. He is literally their father (in the most uninvolved way possible), and they are literally his children.
As an adopted person "biological <insert title>" has worked well for the parents that had sex to make me. For a donor parent, I probably just use "donor <insert title>". I'd advise not worrying too much about the language though. Being kind and thoughtful is far more important than selecting the correct words. A snap judgment selection of proximal words is sloppy but it's impractical to pause to select exactly the right language in all cases for all statements. So too with something this sensitive it might be good to slow a little.
My main point in the last comment is that inserting himself into their lives at all is disrespectful. He doesn't need a word for them because he has no relationship to them: he was an anonymous donor to enable their actual parents to have kids that they wouldn't have otherwise been able to have.
Agreed, it's highly unlikely. But they have a choice, it's not forced by anyone. If they do nothing (maybe their parents never tell them, or they don't read news, or facial recognition never informs them of similarity), there's no inheritance. If they take consensual action to make a claim via DNA paternity test, the inheritance can be claimed.