Doubledown, it is very tough to live each day with your W while knowing there is an ongoing A with OM. You might want to do 180's, PMA, GAL for about 2-3 months so that you can be better prepared mentally/emotionally and also so that she can she the changes in you. Then at that point confront her. The confrontation should not be a fight -- it must be matter-of-fact, a statement that you know of the affair and have proof. She will most likely deny it. You should also be ready with your boundaries of what you expect and the consequences of her not complying.
In my case, I cannot tolerate an ongoing A. My boundary is that the A ends or she moves out. The only consequence I can think of is that she moves out. She would probably move out. If she does, then you need to establish what this means. She no longer lives in the house, she cannot come/go when she likes. A schedule for the kids, etc.
She is cake-eating, and given the gulf between her and the OM, I would guess that she would want to come back home. So you would need to leave the road home paved. No yelling/screaming about the OM, how could she do it, etc. The conditions for her returning should be an apology and end all contact with OM.
This is what I would do. I also think that a W loses respect for the H if she becomes aware that the H knows about the A and does nothing.
