I'm really torn here on what to do. It's eating me up inside. I've quit checking the texting, etc... but by not at least ackowledging it, I fell as though I am lying to myself by continuing on as though nothing is going on. But maybe that is the right course. Stop the hugs, kisses, etc... but no acknowledgment of what I know.
My question then is this: do I completely ignore the fact that I know about the affair? Or do I ackowledge the affair, with some statement like "I know about you and XXXX and I'll be here when you want to talk about it". Or do I flat out accuse her and give the the ultimatum (i know that's bad) "end it or move out".
My vote would be for NONE of those.
I believe you confront, and say something along the lines of "I love you, and have shown you my commitment and my re-dedication to our marriage. But I will absolutely not live in an open marriage, and especially cannot live with a wife who is lying to me. I know all about you and ______, and you're a grown woman and I can't tell you what to do. All I CAN tell you is, I'm not willing to live in a marriage with a third person in it."
And then detach.
To ignore it is, I sense, violating your own sense of personal integrity. To issue an ultimatum is controlling. To just continue to be the "nice guy" is demeaning and emasculating, and she will continue to "cake-eat," getting some of her physical and emotional needs met by her boyfriend, and some of her other emotional and financial needs met by you. She will never have to really make a choice.
Did your wife ever really get to the bottom of why she would turn to someone else when her marriage was having problems? Unless she did -- and does -- the chances of serial adultery are very high, unfortunately.