SpunkyKatt,
thanks for the post.
Based on my current thinking we will be doing the following.
My wife and I will go to counselling, ASAP. Things have got dangerously volatile, and I personally believe that moving out to a neutral space would be the best thing, particularly for the children. My wife strongly disagrees at present. We wil have to work on this, but I appreciate the comments about the kids and me, without S or my wife.
I believe my wife is afraid that if I move out she will lose her immediate hold on me, the other worry she has is that she won't know what I am doing, and obviously sleeping with S will be the first thing that comes to mind.
S and I work fairly closely together, so I can't break 100% from seeing her. I believe we can agree to keep things 100% business. I have no illusions that this will be easy, BUT I am trying to give my marriage a chance, while still keeping my job. I think losing job and house will just make things even worse, there really are very few good employment options here, its not the US.
I am being honest with both S and my wife at the moment, even though its probably causing more pain all round.