I couldn't imagine being in your shoes, and I feel really bad for you. The pain must be absolutely terrible.
You need to leave her. Now. If she values the "marriage" that much not to continue this, she will stop. You need to set boundaries. This is a case of justified infidelity in my eyes. No, no, NO.
It will be hard to leave her, or have her leave the house. But, this isn't going to be solved while you are there with her in my opinion if she breaks the boundaries, which she obviously doesn't seem to care about.
She says that she'll stay married to you under HER conditions. That's just NOT RIGHT. Marriage is a partnership. You have conditions I'm sure as well. MAN UP. MAN UP and take control of the situation.
----"Et tu, Brute?"---- me:28 W:24 S4 T:6 M:4 EA Exposed: 5/21/10 Bomb: 6/20/10 (Father's Day) NC w/ OM: 7/10/10 W moved out 8/21/10 http://bit.ly/aOrZne - My sitch