1) My opinion, she's not staying in the marriage 'for the kids'. If the marriage was bad enough, she'd be out the marriage and take the kids with her. In a bad marriage, the kids are better off out of it so they don't see daily bad behaviour and believe that's the way to grow up. I think she's staying in the marriage for her herself and the lifestyle it gives her, ie the benefits of a family, security, and the ability to have 'fun on the side'.
Now, she's the one cheating not you, she's the one that needs to work out what she wants, but why not remove yourself from the inevitable shit that's gonna land when either a) the husband finds out and/or decides he doesn't like what she's doing or B ) she decides eventually to drop the marriage and expects you to take up the slack?
I think it's probably the opinion of most folks on here that you deserve better than that
2) yep, it's exhibitionism, although if you do it without SO knowing, then I guess it could be considered somewhat iffy on the cheating front....