Persuing 100% happyness with net you a life long serch that will never end, and an overall happyness of about 10%. You'll never be anywhere near 100%, so you need contentment in there, too.
Matt:
Fact about you: Oyu're here asking, rather than just axing it. That mean that you are thinking it could work, or that you want it to work. So, as to what to do, you answered your own question. You know what you feel is right.
Fact about you: Wake the fuck up. She did this once before, and she got away with it. She did it again, worse, and is expecting to cry and get away with it.
It would be a HUGE diservice to you AND her if you let her get away with it. To put it bluntly, she has to pay. Doesn't matter what kind of person she is, she is learning something bad: I'll get away with it, and try harder not to get caught next time.
"Once a cheater, always a cheater" only applies if the cheater is satisfied with the consequences. If she ends up on the curb for this, it will leave a very unpleasent memory. Her brain will then associate short term pleasure with long term pain...idealy.
Advice? No one her can tell you what to do, but a thought:
"If you want to go out and please yourself, then you can go out and support yourself too." It's not right that some one go out and act like single chick, then come back and reap the benifits of married life.
Right now you are a crutch, that needs taken away.
Have a separation, get some counseling. Don't let her have the kids (are there kids?).
Also, never take relationship advice from single people.