Very sorry to hear about all this. You are in the right place for help-this board is great and has helped me and many others immensely.
First thing, can you provide your and your wife's ages? That information always helps with responses.
Let's take it from the top here...you were in an unenviable situation that most people don't have to go through, meaning your ex-spouses/parents of your kids were together. What a nightmare! Hard to blame you for not exactly knowing how to handle it, as you said you are the kind of guy who would let things go to keep the peace.
I will try my best to not beat a dead horse on this, but unfortuantely, you probably realize that your W lost a lot of respect for you because you did not stand up for her. You claim she filed charges against your D's mom "righfully so", so by your account too your wife deserved to be defended. I get that that was tough to do, because your D was involved as an innocent party to the whole debacle. You may have always felt like if you get involved too aggressively, things would get worse. But I'm pretty sure you needed to do something greater, because your wife needed to know you valued her and wanted to look out for her above all else. I do think you meant well, but unfortunately meaning well doesn't often translate to a W's favorable image of you. My guess is that you had your work cut for you from then on. Does that sound about right?
I only rehash this part, because I think it's important for you to understand how serious your wife took your response (or passive response) to the situation. Enough said about that, let's move on...
I think you can take a lot of solace in knowing that your wife was very patient with you overall. She tried to get you to go to counseling, to read, wrote you letters explaining her concerns, wanted you to show more of an interest in making love, etc. She made a strong effort, but to her, you were always a step behind. By the time you responded to what she was telling you, or warning you about, she was already moving further away. I think you need to understand that too, but I know you do...the subject of your post says it loud and clear.
Here's the good news...I think she really loves you to have been this patient. Where there is love once I think there can always be love again...but you really have to give her her space here. I didn't see anywhere in your post that said she had talked to a lawyer or filed or anything, so that is GOOD. Remember, actions speak louder than words. Some people just go right ahead and do it. She's just talking about it, albeit intensely. I would stall any divorce related actions as long as I could if I were you.
At the same time, I suggest you give her all the space she needs. While doing so, use the time to work on pulling yourself together. You will have to cease and desist all crying and pleading...I know you know that intellectually but you HAVE to put that knowledge into practice. It makes her uncomfortable and makes you look weak. Whatever you have to do to get over the urge to plead, do it.
OM is obviously a huge problem that must be dealt with, but right now, that's not a battle you remotely have a chance of winning...you need to get yourself together first. Perhaps their affair will flame out on its own, perhaps it won't. You can't worry about it right now. Just work on reflecting on yourself. I highly urge you to get individual therapy and bring up everything you did on this post. If you sign up with a therapist and don't like him right away, get another one. Get one who is pro-marriage as well, as DB suggests.
I hope I have not come down too hard on you...because I can tell you know most of these things already. You just have to realize nothing will improve until you pull yourself together and can exude the image of a strong, confident man. It's the worst time in your whole life to have to portray that, but it's exactly waht you have to do.
Post here often, we're all here to help. I wish you well.
M-34 XW-32 D-7 Found OM's presence 4/09 Separated 12/09 Divorced 8/10 GREAT relationship as coparents since 8/10