In 2-3 years, W is going to look back at this and say "what did I do".
This is what we all hope and expect. Only time will tell. Let's be real and say that some slip off the edge and find their way back - others don't. And there's really no way of knowing which one your wife is.
Hopefully your MIL will understand if you need to make some changes in how your wife is allowed to interact at home. If not, there could be difficulties there. Make no bones about it though AD, your decisions need to be made with the best interests of you and your daughter, not your MIL and her daughter.
Others may offer you different takes on how to respond to this revelation. Understand that I share my opinions. It's up to you to take all the input and decide what will work best for you. Just keep in mind that, at this point in the drama, what's most important right now is you and your daughter. In a sense, your wife has crossed over to the dark side.
Your love is what carries you through this stuff, so it's important I think to remind yourself of why you and your wife fell in love and married. She's crossed a big line, but it's a line that many, many couples have found healing from with time and counseling. The deal is, she has to reach a point where she is able to acknowledge what she has done wrong and agreed to commit to changing. I'd say this is well on down the road for you two.
I stress again to take care of you and your daughter. You will be playing both Mommy and Daddy for the most part. Spouses in the throes of an affair are notoriously undependable parents. Reassure your daughter, let her know that Mommy loves her but is having a difficult time right now. And give her a larger portion of your time and love. Then don't forget to care for yourself too.
This definitely is not something any of us ever wanted to experience. But you are at least in a place here where we can offer support and a listening ear.
Blessings,
Bill
"Don't tell me the sky is the limit when there are footprints on the moon."