I think Sarah is out of control. She is being too open, if you've seen John going into her house. She isn't hiding things.
She feels confident that John will leave Emma, I think, and is, on some unconscious level, preparing the ground for this by telling her friends about the relationship and making it a soon-,to-be official fact which is about to happen. I feel she thinks that her close friends will end up accepting the new couple.
I think you have to drop Sarah as a friend. She is hurting a lot of people. It will be right for you to tell her that you have had time to think, because at first she dumped the news on you, and that you are going to tell your husband because you don't have secrets. Tell her he is as capable of separating work and friendship because he is a professional, but he probably won't approve of her, now.
I think you could say to Sarah that if she is determined to put her own convenience first, and romance married men, you are not sure that you trust her around anyone. She might come on to your husband.
Say she might have had four years of shared time and growing closeness to convince her she and John are soul-mates, but, presumably, in the beginning, she hardly knew him ( he doesn't work with her - how does she know him, by the way?) and just decided she fancied him, and selfishly disregarded the fact that he is married. Maybe it started out as casual like her other romances, and she thought a married man would save the teci of explaining she doesn't want commitment. Say, she isn't harming a partner of her own ( not sure if she has kids to hurt), but she is hurting the well-being of many other people.
If you speak out, and, being open as she is, she tells John, he might decide to break it off. If you say nothing, all the friends risk being complicit in deceit; John might be sleeping with other wome n and giving Emma STDs. And poor Emma is none the wiser.