Update: Had a talk today, wife finally admitted that she is in love with this loser of a dude, and that they are still in contact, and that they've had sex more than once, etc... I immediately told her that she needs to be out of the house, in a hotel, and that she needs to do it as soon as possible. She agreed, and headed to a hotel for the rest of the day. I think she was surprised that I called her bluff, and she's probably relieved to not be lying to me anymore (in her mind).
I'm relieved to have her admit the truth. Im also disgusted. But I'm a little hopeful. I think she's due for a reality check, what with being away from her kids much more, me not waiting around for her, etc. I'm guessing her lover will become less appealing also, though it's hard to just sit by.