What is my Next Move?

[MrBond]

"she's confused and needs him to understand..."

Understand what? It's also naive for her to say that she's not going to have sex with him. As if that is going to make you feel better.

If you can't kick her out due to your current situation. I suggest that you don't be home when she returns. Go and take your kids somewhere on a trip. FAR away. Leave a note for her telling her that you will be gone a few days and leave it at that.

If she tries to text or call you, ignore them all. Concentrate on your kids.