Frackal makes a good point, which i will base my statement around. If it only happened once. I will assume it did. If not, then it is inexcusable and a complete and utter lack of respect barring no excuses.
As for the rest, I think the feeling she went through cheating on you probably was pretty hard on her as well, as difficult as that may be to believe. She obviously loves you, seeing as she is your wife and has chosen to spend her life with you and have kids with you. Think of the hurt and guilt you would have if you slipped up and made a very bad choice and let a situation turn into something such as cheating. It certainly isn't good on either side, but I'm sure it was killing her inside also, in turn, perhaps teaching a large lesson and only making the relationship stronger if you do go through with it.
It would take a very unique situation for me to be able to stay with someone that cheated on me, but I could see myself doing it. It is a complete slap in the face which bring out primal urges to seek revenge and just bail because of the direct hurt it causes. Although like havoc said, you have to look beyond those and see it from a higher level, as mistakes do happen. No one is perfect. Some mistakes are larger than others, but nonetheless, people screw up. Doesn't mean it had any direct malice or intent to hurt.
I am still a young'un so i don't know the feeling of being a father, but that combined with everything else, I don't think I could let it go either. On a positive note, Just think if the relationship doesn't end from this (which it looks like isn't going to happen), at the very least it will be much stronger after going through this