Now to the point...I suspect she has had an EA, likely not PA, with our musician friend for many years.
You are probably right then.
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My biggest concern is my wife making it seem that our musician friend is a 2nd dad to my kids...I wish to not confuse my kids with that BS. I'm their dad, no one else.
Assuming you are active in your kids' lives then this will never be an issue. They know who "dad" is. And if you haven't been active in their lives, well now is your chance to do a 180 on that.