I am hoping against hope that a poster called Loves2Walk will come onto this thread, but if not, do a search on her name and see her story. It's a long thread, but do read all of it - it could have been made for your situation.
This is wrong on so many levels and you are not -repeat not - paranoid at all.
I'm afraid this seems to have followed the tried and tested affair script. An opportunity presents and in order to justify having an affair, he is vile to you in order to reduce your connection. Any concerns expressed by you are turned against you in a way that's intended to make you feel in the wrong, paranoid and suspicious.
He has only admitted anything after a lot of questioning and after you'd found that grossly inappropriate text. I would imagine there is much more to find out.
Okay, first up you need to give yourself permission to object to this strongly. You feel threatened and no amount of telling yourself that you should be "cool" about this is going to stop that very sensible inner voice telling you that this is unacceptable.
The only friends worth having are those who don't threaten your marriage.
So you state calmly and clearly that this friendship threatens you (as no doubt it would your H if you were getting "I love you xx" texts from a younger man and hiding them) and that it stops right now.
Buy a book called Not Just Friends by Shirley Glass and suggest he reads it too.
The above is a must if you are to get the a healthy dynamic back in your relationship, but there is another issue that I think needs resolving too.
I think you need to know whether there has been a physical affair, as well as an emotional one. The latter is in no doubt, you see.