dancerinthedark hopefully you have heard from enough people now to validate that your feelings are absolutely valid and that your instincts are spot-on. That in itself can be incredibly strengthening, although frightening too as Loves2Walk says.
I want to reinforce to you how sound those instincts of yours are. When you met that woman and saw how flirty she was, it jarred, but I'd bet it was something about your H's reaction to it that really niggled. You say you "decided to rise above it". This was probably your first bit of denial, bargaining with yourself that your H would be able to see straight through the flirtiness and that he couldn't be blamed if someone fancied him, right?
Then your H started to behave in a "vile" way to you. Your instincts led you to immediately connect the two issues; the OW and your H's behaviour to you. Spot on again. It turns out there has been a mutual expression of attraction and a "conversation", that he would never have told you about if you hadn't forced the issue.
Months later, your instincts served you well yet again. You behaved in a way that is most out of character and looked at his phone. You had your suspicions confirmed again.
You were fobbed off with a ludicrous tale.
I wonder what has happened most recently, that caused you to post? Trust those instincts above everything, they've never once let you down. Every time your inner voice has moved you to take action, you've been proved right.
Now it might help you if you keep remembering this truth. The moment this friendship crossed the line to the extent that they admitted a mutual attraction, was the moment he should have distanced himself from it.
Instead, he moved towards it, behaving in a vile way to you, in order to increase his justifications.
The mistake you made (but hindsight is a wonderful thing) was in not expressing your expectations clearly and emphatically as soon as he admitted to having that "conversation". That this friendship must end.
The problem with this was also that by the time he admitted the conversation, he had no doubt become addicted to the feelings he was getting. As long as you couldn't prove anything and weren't insisting he ended the friendship, he could carry on.
And it did, till we get to the point when she is saying she loves him.
Hopefully what you're seeing now is that he has done such a number on you, belittling your feelings and making you feel you are "going mad" and "paranoid" (I am quoting your words) and that contrary to this, you have simply been gaslighted. Google that term for more information - it is horrifying.
You are not mad, paranoid or unreasonably jealous. He has behaved appallingly to you and I suspect there is so much more you don't know. Hopefully this will give you strength to find out now.
I would also add, if this is an affair and he admits it and tells you the truth at last, you can if you choose, move on from this and learn about safe friendships and how to deal with perfectly normal temptations in a marriage. But not while there are still secrets.
So my advice to you right now is to stop confronting him at all and start to verify things for yourself. Do some checking up via the usual methods and don't feel in the least bit guilty for doing so. This is your mental health at stake and no-one's going to preserve that more than you. This is a kindness to yourself and is long overdue.
Keep posting.