Trust your instinct. Take a deep breath and be calm.
THEN TEAR HIS FLAMING HEAD OFF! 
Seriously, read him the riot act. It stops right now, or he'll be a weekend dad.
Never, ever bury your head in the sand in situations like these. If he gets wind of your knowledge of it, and he already has because you have spoken about it, he will think you are OK with it, because you are not kicking him into touch. This may not be a PA, it may be only a stupid flirtation.
Matters not ultimately, IT STOPS RIGHT NOW. TODAY.
Tell him that he will change jobs if he has to, or he will lose his family. Mean it, because being single with your lovely DC all to yourself is a darn site better than being cheated on or living with a betrayer.
Plus You have to set an example to your DD.
Broken home? don't be daft, I bet you will be snapped up by someone who will actually only have eyes for you.
A decent step-father is better than a cheating low-life real dad!