My wife actually did this to me, although it was with a GROUP of people. I just said "Have a good time," and went to bed a little earlier than usual and made sure all of the lights were out and the house was locked up tight when she got home. ROYALLY pizzed her off, but she got the message, and she never tried that level of disrespect again.
Bomb, as Burg just said, YOU need to decide what your boundaries are. Hell, for some people, that's a flat-out OPEN MARRIAGE, but you'd just better let me meet the other guy first. For others, we would not tolerate emotional or physical relationships between our spouse and any third party.
Most of you are debating whether such confrontation and exposure will WORK. Having just gone thru this, I would argue that the greater issue is -- whether or NOT the marriage makes it -- do the parties emerge with their self-respect intact, so that they can move on to healthier relationships over the rest of their lives. To that end, Bomb, I'd ask you a simple question:
How does it make you feel when you allow your wife to carry on an EA? How is it going to make you feel tonite to sit at home while she is out with another man?
Only you can answer these questions for yourself. I was the world's quintessential "Niceguy," and I there was no way in HELL I was going to go down without fighting for our marriage and our family. And I would be willing to BET that -- at some level -- your wife is looking to see if you will fight for yours.