Well, I can certainly sympathize with your position in all of this and I agree in that if the marriage is to be saved the other man has to go. I don't know about the friends though.
I don't stop my husband from having friends, that would not be healthy.

I would strongly push for meeting with a marriage counselor and have someone work with both me and my husband separately and together to see if the marriage can be salvaged.

I think this is VERY important for the children to see too. I think children should learn that when we can't figure a big challenge like this out the best thing to do is ask for help.

One of the big factors in my taking steps to see about working out my marriage is because I definitely did not want my daughter to be hurt. Prolonging definitely "hurts" the children. Children really depend on their parents to show them how to handle big life challenges like this. What has been taking place this past year of separation has definitely not been healthy for them. One thing I learned about that reality is listening to my daughter's friends talk about it with her not knowing I was able to overhear them.

Children feel abandoned during all this mess. They may not say it to you or your wife, but they internalize this as the two of you not loving them enough to "fix" this problem.