LionKing asked Malady to weigh in ... honestly it believes #5 to be the best option here. Your wife needs to stop egging him on (whether she means to or not, she needs to recognize HE sees it that way -- you may need to have a CALM, LOGICAL heart-to-heart with her to get her to see this, including sharing some painful feelings with her about how it affects you) and needs to be the one to tell him stop showing inappropriate attention. Otherwise it becomes a big game at your expense. If your wife needs more sexual and/or other types of affectionate "attentions" she should get it from you, and you also need to open a dialogue with her (and be willing to listen and remember this would be about how she feels not about judging you) so she can describe what she feels (if anything) she's "missing" in your relationship.
On the flip side you do need to be aware especially as we ladies get older it really means a great deal to have men outside the marriage indicate that they find us attractive (without "coming on" to us). It bes a self-esteem thing, and only coming from hubby too easy to dismiss with "well of course, because he loves me he says this." That being said you do need to give a little space for that to happen in a friendly, non-invasive way, maybe allow for a comment or two from others expressing appreciation for her attractiveness or appeal that don't cross that line into feeling invasive or pushy (i.e. sexually aggressive). You and wifey need to talk, talk, TALK together to establish where the boundaries exist for you both on that sort of thing, and before either of you do any of the above you both need to commit to doing it all from a mature and calm perspective -- if that means getting a couples counsellor to mediate and help you find that ability then by all means find one, because most humans cannot be calm and mature with emotions running high and insecurities all stirred up, and there bes no shame in finding help to do something right whats worth getting right.
best to you as you work on sorting this all out.