I think it's important that you state your wishes/feelings/opinions on this subject matter with your W. I don't think, however, that you want to turn this constructive, direct communication into ultimatum time, where either she conducts herself according to your wishes or you're going to impose some kind of consequences. Unless you are truly willing to live with the outcome of said consequences (meaning that you will follow through and be happy having made the changes you threaten). I think that you make some good, solid points about what you (plural) are exposing your child to, and while your wife may not be receptive to what you say (I would fully expect to be reacted to in a really defensive way - but that's my experience talking), it's your obligation to address issues involving the well-being of your children. You likely won't get her to change her opinions or consequent actions by talking about it - but you HAVE (in my opinion) done your part.
As far as limits (boundaries) go, I think it has more to do with how you are treated, and what you're willing to subject yourself to. If the abuse your spouse dishes out exceeds your limits, you walk away; spend some time away, etc. It's not a punishment; it's moving yourself to a safe place until it's safe to return. Beyond that, your spouse understands that you will not subject yourself to abusive treatment - which will empower them with the knowledge that they can keep you around more if they don't act in ways that disrespect you. These are not arbitrary feelings you have about how someone else conducts their lives, they are straightforward ideas about how you allow yourself to be treated by them. Difficult in this area (the whole affair thing often feels like emotional abuse - yet in actuality, it's us, the betrayed, that maintain the hurt, not them), because they (the cheaters) are conducting themselves in ways we don't approve of, yet it is not done to us. On the other hand, because of the contract we entered into with them, they are in fact doing something they shouldn't and should be accountable to us for. This is a difficult place to draw a line, because we feel righteous in our hurt and anger and want to make them behave appropriately. Yet the truth is that they are only accountable to themselves, as we are to ourselves.
So, set your boundaries for the purpose of regulating your environment with plans for how you will enforce these boundaries. You are a person that deserves respect. You determine the respect you get from others by what you give yourself. You demonstrate the respect you have for yourself by how you allow people to treat you - rather by the kind of treatment you will not accept from others. This often goes against being a "nice" guy. Being nice is often a product of the fear of rejection. You therefore will allow others to treat you however they want to because you don't want them to stop giving you their attention. It's a kind of masochism. Once you stop believing that you NEED their attention, you can learn to get what you want from another person without paying a price for it. That price is often your dignity and self respect.
“No problem can be solved from the same level of consciousness that created it. ” – Albert Einstein
