1. The best way to handle it is to gauge all her actions and the context.
2. The soundest thing to conclude here is that she's seeing value in being kind. I am sure the motivations are mixed and clouded for her at this point. I don't expect she's become an angel or machiavelli either.
3. She expreseses kindness, express casual kindness back. I don't konw if I would reply with "I'm fine" even if its upbeat, that too often is used as a defensive wall. I would say "Good!" or "Great!"
4. if he hasn't approached you with an apology and a committment to stop terrorizing your relationship and your family then he is unequivocally a coward. It takes a lot of guts and maturity to go to your door and offer that, but that's the mature thing to do. You won't get that most likely.
5. Your wife will NOT be over the angry stage yet, that will take a LOT of work between YOU TWO ...AFTER she has made a committment to work with you. From my research so far spouses rarely if EVER let go of their anger on their own, they usually come back conditionally and iwht a lot of hesitance.
6. Do NOT EVER expect a sudden change of heart on her part Buster. It hardly ever happens. What you will get is a progression similar to the one below over a period of months :
"ok, I have been thinking..."
"I still care about you..."
"I dont know if we can make this work"
"do you really think the two of us have a chance?..."
These four moods are gradually increasing in receptiveness to you. THAT is how turnarounds from my research so far seem to be taking place...
NEVER belive what she tells you outright, and don't believe even half of what you see. She's civil for a variety of reasons...just accept the civility and use that to get closer to her. If she wasn't talking to you at all it owuld be a LOT harder to turn her around.
If she hugs you each time before you leave...BUY a NEW COLOGNE ...women like men who have a nice scent. I know it sounds primal, but it will work.
Romancing women is done by romancing their senses...show them beautiful things (works of art), have them listen to beautiful things (music), have them smell and taste beautiful things (cologne, a nice dinner, etc)
If she wants to get close then work with that, buy some soft clothing that feels great to touch, wear cologne etc...dress up for her.
Try to be happy about yourself though, not her. Be happy about what you are doing for you...you want her interested in YOU, which means YOU have to be interested in you.
Try not to throw yourself at her feet and tell her your whole life story here. You just want to plant enough out there to catch her interest and GRADUALLY guide her home to safety.
If you push too fast, it will stress her out. If you go slowly, it gives her emotions a chance to COOL DOWN for him and WARM UP to YOU. If you push yourself too quickly on her...HE will still be TOO CLOSE and she will feel stressed out by you.
You need to gradually let things cool down there, you can help that along by doing things to get her interested in you.
Look at it as just love, she only has so much to go around. if she starts offering YOU more, HE will get offered less and less. If you chase her for it, she's goin to hand it to him instead. you have to make her want to love you. That means becoming someone she WANTS to have her love. That transition for her takes time. Don't expect an overnight recovery or an instant switch. It is going to take time and it will likely be gradual.
You have to look for signs of improvement. They will be there, but they will be subtle.
Use the positives to guide you and ignore any negatives.
You need to read more Buster, we can't emphasize learning about affairs and how to fight them. They are cancer for a marriage, but there are things you can do to fight an affair just like a cancer. Don't trust your instincts, they are the enemy. Educate yourself about them asap.
Keep up the good work, be kind, be loving, but HOLD something BACK.
I keep typing things to say to you and end up deleting them because they sound stupid. ok here goes:
1) the only thing for certain is that this guy is a coward. My wife knows i'm not a coward because I am fighting for this R.
2) would it be wise to stop contacting her and let her contact me ? or should there be exceptions like I should contact her about our son if need be and that's it ?
3) should I stop talking about our R to her parents and friends and just keep it between our pastor and I?
4) should I see if the pastor would talk to her? or would she see that as cornering her/intervention ? just let her come around herself ?
5) i have mentioned to her about going to a gym 2 days a week with our mutual friend and invited her if she wanted to go sometime. was this a bad idea?
2. Your relationship with your wife is over when YOU say it is over ----MarkF
I am trying so hard to stop thinking about her and what she is doing at certain points of the day, like when I have my son I tell myself she is with OM. it does me no good. Should I avoid contact with OM at all costs ? I know where he lives and works, his screen name on AOL, his cell phone number, etc. instinct tells me it will do no good, and he will run and tell W and she will think i'm a sobbing, wallowing mess or something to that effect.
2. Your relationship with your wife is over when YOU say it is over ----MarkF
am i really supposed to NOT believe anything she says and half of what she does ? she says she cares for me, but not as a husband, just as a friend and the father of our son.
2. Your relationship with your wife is over when YOU say it is over ----MarkF
I am sure that DR, DB and other books will teach me to combat this "cancer" but this kind of cancer is one that she doesn't want treated. I pretend as has been mentioned here that she is ill and needs to be cared for, but when she has an hour of free time or so, is there a way to get her to WANT to spend it with me instead of him ? If i don't invite her to do something, she won't invite me just back off ?
2. Your relationship with your wife is over when YOU say it is over ----MarkF
do I just pretend she's a friend whom I have a child with, and if she only wants to see me when our son changes hands, thats it ? it is hard to bait her and at the same time back off. we've been separated for almost 5 weeks, but still talk (minus R talk) like we're interested in each other's going-ons.
2. Your relationship with your wife is over when YOU say it is over ----MarkF
her sister tells me that although she (her sister) would like us to stay together, dragging this D out as long as possible is just going to hurt her and I more. however our pastor tells me if i love her and am committed, to fight to the end. ???
2. Your relationship with your wife is over when YOU say it is over ----MarkF
Gotta keep my focus..gotta keep my focus. 
just back off ?