I agree that in the end we have to make ourselves the better alternative to the OM. But as long as the OM is front and center how is that supposed to happen? If they are in the chemical induced fog of emotion they simple can't be rational.
If you think your W is just going to wake up one day and sees this, you are fooling yourself. Of course could always hope that the OP does something crappy to your W and she starts to turn, but you might as well hope to hit the lotto as well.
SL..your lack of confidence comes through in your posts. And I understand it oh so well, so I'm not trying to call you out. But I think you really need to think about what it means to be confident and strong. Work toward that goal. Part of that is, as JS says, not focusing on your W. Also STOP trying to explain away her behavior. Regardless of her true intentions with this guy, it is having a substantial impact on your marriage that should be enough.
As for any confrontation if she doesn't have respect for you why should care about your feelings? As I said before, from a professional standpoint she is acting really, really stupid. The boss is too, especially since he has a history.
your W's response -- defending the boss, accusing you of not trusting her, accusing you of being controlling/jealous - are right out of the EA playbook. If you talk, you need to be prepared to address those claims and be firm.
Think about it from the other side. Say you had a good female friend. She is ONLY your friend with no feelings because you love your W. You have lunch with this friend, you call, text and email. Maybe you do things together. You W tells you that she is uncomfortable with this friendship. What do you do?
Lastly, I'm guessing your W isn't a person who likes being told what to do. She will have to come to make any change with respect to her boss on her own.
Patience is bitter, but its fruit is sweet. --Jean Jacques Rousseau.