This technique will help you get some distance and regain your self-respect. It will also show your husband that you are capable of moving on and that he can't treat you like dirt without some consequence. He needs to realize what losing you will feel like.
3. If you are able, go back to work. Start living your own life on your own terms. This will make you strong and more independent. You can't lean on and expect your cheating husband or his family to be there for you. If you get a divorce, you will probably still have a friendship with your stepson and his children. Prepare your exit strategy from the marriage so that YOU end up OK. These preparations will make you less afraid and desperate and may re-attract your husband. People are attracted to strength and resolve.
4. See a divorce attorney right away. You do not need to file, but you need to get information and peace of mind. Know your rights. Ask your lawyer what you should document, etc.
5. Get angry. Even for just moment. This may provide you the strength to act in you own best interests. You do not deserve to be treated this way. You lose your son, you experience immense grief, and HE responds by screwing someone else? Really?
6. Your fear of losing your grandchildren is not necessarily valid. You may maintain a great relationship with them regardless of what happens.
7. People will treat you badly if you allow them to. Start thinking through some healthy boundaries. For example: he can't talk to her on the phone in front of you, he sleeps on the couch/guest room if he's at home, if he decides to come home after a certain time you will lock the doors, take half the money in your joint bank accounts and set up your own account, perhaps he should move out. Y
ou can't really "nice" your husband back into your marriage. You need to show some resolve, be less available, lay down healthy boundaries. Some people would say you need to always look happy and be attractive, etc. That works sometimes, but often looks a little desperate. If you genuinely want to go out and have fun and live an interesting life, your husband will notice, but don't do it just as a tool to get his attention.
At some point you may want to lay down an ultimatum to your husband: it's her or you. If he picks her, then you file for divorce. (This the last and final stage of your strategy if nothing else works.)