AdamNichol regarding the affection thing, OP is the one causing the problem. Instead of letting her be affectionate towards him in a way that she is comfortable with, he is pushing for more. And the 'more' is more sexual.
He says she will hold hands but he wants a cuddle which is physically more intimate.
He says she will cuddle but he wants kisses which is a step further into physical and emotional intimacy.
He says she will kiss him but he wants a hand job which is an intimate sex act.
You get the picture.
So OPs wife thinks to herself, I'd love to give him a cuddle. Oh but wait, then he'll try to kiss me and if I do that he'll want a hand job and that's not what I want right now so I'd have to reject him and that will hurt his feelings again. Dammit. Oh well, I'll just hold his hand.
Of course there's nothing wrong with what OP wants, it's just that his way of trying to get it is pushing her away and making it less likely for him to get it.
If he respected her boundaries she is more likely to let him in and be comfortable in her intimacy with him again.