I wouldn't end a friendship because my friend was having an affair, but I would question the values of a friend who was condoning her affair partner's reluctance to reach a fair divorce settlement with his wife, and that might make me rethink the friendship, yes. If she's a good enough friend, I don't see why you can't talk to her about the aspects of this that trouble you. What she tells you in return may clarify the position you want to take about telling her husband. I certainly wouldn't reflexively 'report it' to him out of some black-and-white sense of morality without knowing a whole lot more about what's going on behind closed doors than you currently do.
I don't see the fact of an affair as automatically being your business; rather, your business is to support your friend (especially, imo, because the guy she's seeing sounds like a scumbag). I don't agree it's a double standard either, as pp have said. Most people who post here are women, and often when they have a dilemma regarding a friend the friend is a woman too. So yes, if I'd spotted my friend's husband at the theatre with his affair partner, I would probably tell my friend, because I would probably see that as the best way to support her. But I'd also probably do that if my friend in OP's scenario was the husband - except it's not. OP says her friend is the wife and she doesn't know the husband well. So in this scenario, once we'd discussed what I now knew, I would do whatever I felt best supported her, which might well include keeping my trap shut.
I think you need to ask yourself how good a friend you think she is. If you're really close, surely you owe it to her to talk about what's going on in her life instead of issuing ultimatums or telling tales? And if not, then why are you inserting yourself into her story at all? Who is your loyalty to here, and why? At the moment, it all just sounds a bit gossipy and prurient to me. Sorry.