Goodness Anna has had some stick here! these things happen! in an ideal world everyone would neatly end one relationship before starting another, but seriously, thats not the real world is it? these things happen, it doesnt make someone a terrible person just because they have made choices that others dont approve of. Nobody has died, its not the end of the world. 2 people have met and fallen in love, they have dealt with it. Anyone saying that the H is a horrible awful person because they didnt walk away and stay with a wife that they obviously werent happy with.. well, what can I say?
To the OP, you really do need to try and move on, it has been a long time and your anger and resentment will not be helping the children at all (dare I say that you may need to take some responsibility for your child saying that they are not as happy as they were?)
Im sorry for your situation, I really am, my ex cheated on me and it is one of the worst things that has ever happened to me BUT now I can look back and start to understand that he wasnt happy and whilst it wasnt a great way to go about showing me that, I do understand it more now. Our children are happy because we always put them first, they would never see any anger or resentment from either of us, because that isnt necessary, its not their problem, its ours :-)
You only live once, and wasting your life thinking about 2 people who you cannot control is not helpful to you or to your family. As difficult as it will be, you need to start making a life for yourself, prepare yourself to start dating again, prove to the world that you are the bigger, stronger person here. Do that for yourself as well as the children.
This woman is in your life, whether you want her to be or not, you are going to have to accept it, sorry. It would be much easier for your children (who are the most important people right now) if you put on a brave face and start to see some good in the OW, even if you dont feel it right now.