This really just further confirms your wife's issues. Think about it. Just the other day she talked to you about the void in her life that she needed to fill....well that was the closest she ever came to being honest but it was still way off. She just let him pour himself right back into it and took the easy road.
She has a long way to go before she is ready to really address HER needs and not look for them to be fulfilled by something on the OUTSIDE.
But you. YOU have been here before. You have 2 choices.
Sink or swim.
Continue on as you have been - has there been any progress?
Or
You can tell her to move out because carrying on this blatant affair under the roof you're paying for is not acceptable any longer and neither is the way she is teaching her daughters to treat their future husbands.
There you have it...the extremes....find your "middle of the road again, Frank...that's all you've got to do.