You know that it will get worse before it gets better. This has MLC stamped all over it. She obviously is a low life skank and has no problem acting like a whore with a married man in a public place.
Of course you feel bad. Having it brought to your attention and seeing it every time you close your eyes ranks right up there with having your heart cut out.
I might think about telling him that word of his behavior with her in the store is making it's way back to you and that is not a level that you are willing to sink to. Draw another line, but don't make any threats to him. Be unavailable for a day. Have you read the Love must be tough book yet? It is a very easy read and will make you feel better.
Most of us are about as happy as we make up our minds to be.