New Zealand consul Barbara Welton, from the embassy in Cairo, reportedly sat on the floor to negotiate, saying: "I am not leaving this building without my citizens.''
After hours of tense negotiations, the consular officials left. Ms Puriri managed to leave shortly afterwards but the children could not be extracted.
Details of the custody drama have emerged after the Ministry of Foreign Affairs and Trade (Mfat) last month announced it would axe some 300 jobs and require another 600 staff to reapply for their jobs.
Labour leader David Shearer today said Ms Welton was among the staff who would have to reapply for her job under the cuts.
He said Ms Puriri's experience sounded like "an absolute nightmare'' and any New Zealander in a similar situation would want to know someone from their home country would stand up for them and fight for their safety
"It appears that Barbara Welton, New Zealand's consul based in Cairo, took a risk and did just that,'' he said.
"While we don't yet know all the details of this incident, it demonstrates how important it is for us to have New Zealand diplomats based overseas providing assistance.
"Every Kiwi who has travelled or has a family member overseas will want to know that if they get in trouble, there will be someone on hand to help.''
Mr Shearer said while the public service should be efficient and effective, some services should not be cut, particularly those relating to security and safety.
Mr Key today said it was too soon to say whether Ms Welton would have to reapply for her job under the proposed cuts.
"Mr Shearer's making those claims and he's ahead of himself. We're going through a consultation phase at this point where Mfat are looking at the structure of jobs in their overseas embassies and high commissions, but no final decisions have been made yet and there will be, I'm sure, quite a series of discussions that will take place once that consultation comes in.'
Mr Key said the ministry was working hard to help the family.
"You'll be aware it's a very complex child custody dispute and we're doing our very, very best to give support and to give help.''
Mr Key said it was his expectation the same level of support would continue under the proposed changes and there was "no suggestion'' someone like Ms Puriri would not get the same assistance.
"I don't think there's any doubt that our foreign service provides a great role and supports New Zealanders in their moments of need, but what is also true is that we need to modernise the foreign service.''
Foreign Minister Murray McCully has called for a review of the case, while the Ministry of Foreign Affairs continues to help Ms Puriri.
"While the New Zealand Government cannot interfere in the judicial processes of another country, the ministry will continue to provide whatever consular assistance and support is possible to Mihi Puriri and her family,'' Mr McCully said.
He said he had no information to support suggestions in the media that ministry staff might have breached Algerian law during attempts to assist Ms Puriri.
Ms Puriri has spoken about the distress of being separated from her children, who remained in the Mostaganem apartment with their father and his family.
"Its incredibly difficult and my son is going to be turning one next week, which is just really, really upsetting ... Not seeing them, and not being allowed to see [my children], is just really distressing.''
A Ministry of Foreign Affairs spokesman yesterday said the officials had returned to Egypt but remained in regular contact with Ms Puriri, and had also spoken with the family.
He said the ministry had been providing consular assistance and advice to Ms Puriri and her children in Algeria since September.
Family law specialist solicitor Jennie Hawker said Ms Puriri had few legal options for getting custody of her children other than to apply through the Algerian courts.
"I think she would probably have to explore her remedies in Algeria because there's not a lot New Zealand courts can do for her.''
If she could not get help through local courts, "she's probably stuck'', said Ms Hawker.
Under international treaty the Hague Convention parents can apply to have their children aged under 16, who have been abducted from their country of usual residence, returned.
However, both countries must be members of the convention for a parent to do so, and while New Zealand was a signatory, Algeria wasn't, said Ms Hawker.
Custody disputes like this, where a Kiwi parent was attempting to gain custody while in a foreign country, were rare, she said.
Azzaoui, a former New Zealand and Pan Asian Boxing Association cruiserweight champion, came to New Zealand after competing in the 2000 Sydney Olympics.
He met Ms Puriri soon after and moved to Northland, where the couple settled and started a family.
