You seem to be such a strong person who doesn't deserve the pain your wife is exacting on you.
If I were you, I'd tape her talking about her affair, then divorce her in a flash and GET CUSTODY. Let her keep on being that man's mistress if she'd like. But I'm not you.
You have to decide whether this is a MISTAKE or a BEHAVIOR. I am inclined to think it's a behavior that nobody can change; that she's tied herself inexplicably to this married man. Don't let her crying tell you it's a mistake, either. You need to look back on your whole relationship, be bitter for a little while, make a decision and stick to it.
But I don't think you should tell the man's wife. It's not your responsibility to do so, but if you do, tip her off anonymously. Like you said, don't give that man any reason to attack you ...
But realistically, he doesn't need to attack you. He has already made the conquest of your wife; don't give him the pleasure of having a reason to dislike you.
Good luck, and feel welcome to continue to come to this forum to work out any problems that come up for you. We're a nice bunch, I think