Peter definitely knew about Will. I can't specifically remember how he found out but he suspected there was something going on even before Will and Alicia started DTD.
Will and Alicia had dated at university before Alicia met Peter; so when Will employed Alicia, Peter was suspicious as at that point no one else would hire Alicia so he wondered why Will did. That suspicion was there from day 1, so he was always looking for it.
The Good Wife is brilliant at the moment. The hurt felt by Will when he realised that Alicia had betrayed him - he couldn't even articulate any words and then his defensive mechanism kicked in and he went 'commando'. Fabulous.
And yes, I totally would.