Thank you all for your very frank replies. I sincerely appreciate them and for sharing your experiences with me.

As almost every one suggested, its true that we all know what is right and what is wrong. Breaking a moral code has consequences and here I am facing them. And to make things worse, when I tried to make everything alright, I can't because she is not mentally stable any more. I mean, I can be really cruel to her and even when she says my name in public, I can deny it saying she is not mentally stable and somehow get away. Besides, she has a very bad reputation at our work place for lying to almost everyone. So much that no one believes her even if she says the truth. In fact, that is one of the reasons that I actually wanted to do something about her character. I wanted to change her to be a better human being and to correct her moral values. But in the process, it ended up like this. Its not as if I was taking advantage of her vulnerability. I mean if I was just a flirt, I could have just "used" her and moved on. In fact it was the other way round. Initially, I was just another "victim" for her and she continued to toy with my emotions.

So its not that I don't have a way to get away but I don't want to do it that way. I am responsible for all this, and I don't want to walk away leaving her like this.

I used to keep warning her about the future of our relationship and her secret life there after almost every day but then her reply was that I mean the world to her and that she is ready to face anything and everything for me. But then again, I don't want to walk away saying that "I warned her. so its all her fault". I am equally responsible and I admit it.

My basic problem is that I know what I am doing is wrong; its a mistake and I want to correct it. If I had to choose between her and my wife, my wife is the choice. But at the same time, I don't want this girl to die or have any mental problems because it. I am responsible for her condition mainly because all I did was guide her from one mistake to another. So I want to make sure that I give her life back to her.

Some of the options that I thought about are:

1) Continue like this till she is stable and then tell her whats really going on - but this has the risk of her becoming unstable again.
2) Continue in the relationship but be less involved. Like keep myself occupied, spend lesser time together in person and over phone. Gradually going away from her and make her realize its not working anymore for both of us. Or even talk more about my wife and daughter when we are together so that she realizes that they are always on my mind.
3) Change my job and relocate to another state. But then there is no guarantee that she won't follow me.
4) As suggested by some of you, I could get professional help for myself first but the only reason why I feel I shouldn't is because I am here discussing it. Yes, I am confused and unable to find the perfect solution but I guess I am still thinking straight and going in the right direction. Maybe a few pills and counseling will take care of my mental state but I don't think it changes the situation at hand.

So, given the situation, I guess the second option is my best bet.