I'm so sorry, my dear, I really am. I wish I could hug you. Don't feel alone, your story is NOT uncommon. Your husband is an awful person. He just is. What he did with you, you can see it in hindsight now, is to isolate and control you so that you'd have no other resources but to rely on him. That is how messed up and insecure and controlling HE is. Someone who loves you wants the best for you, for you to grow and do things on your own, to make a satisfying life in your own way, as well as in the relationship. He treats you as a belonging. No one is a belonging. This woman is a user and is also no good, IMO. She jumps from man to man with some bullshit story and makes them feel sorry for her and probably takes them for whatever she can. She looks at your husband and sees dollar signs in her eyes. So she tells him her sad tale of woe and he wants to White Knight her, this is what it's often called. White Knighting when a guy wants to rush in and save some dilly from the troubles of the world and it makes him feel big and powerful. He can't feel that way with you because...you're not a fake user. The fantasy isn't there. He's living in fantasy with this woman, with the fantasy she's concocted and he likes that. He likes that he's rescuing her little munchkins from whatever. Got to feel sorry for the kids, mother sounds awful.
As devastated as I know you feel....this guy is no big loss. He just isn't. It's like he kept you in beautiful, comfy prison for years and while it may feel secure....it's still a type of prison. HE LIKES HAVING YOU IN PRISON. And at some point....he'll do this with this dilly too. But that's their problem, they sound very suited to each other to me. YOU...on the other hand, can do something much better. You've got maybe 40 years or so to go, that's a long time. You can build a real life for yourself, with joy and accomplishment and fun and independence and maybe a real relationship with someone who respects and truly nurtures you....and isn't just a jail keeper.
So as much as this hurts, and I know it's devastating and unexpected, try to turn this around and see it as an OPPORTUNITY....because that's what it ultimately will be. You don't know how many women have been in your situation -and with kids which is even harder - but yet have turned their lives around in ways that are satisfying to them. This can be YOU too. Don't think this is all there is, life is far more than this and often very unexpected.
As it sounds like he doesn't know that you know, I wouldn't tell him anything at this point. Keep your cards to yourself. There's no winning him back here and that is actually......degrading. Don't degrade yourself, your jailer is NOT worth it. Any guy who would fall for this lame story from this dilly....is a big dummy and he's not worth chasing after. SAVE AS MUCH MONEY AS YOU CAN RIGHT NOW, STICK IT AWAY, HOPEFULLY YOU HAVE YOUR OWN BANK ACCOUNT - OPEN ONE IF YOU DON'T. Work with your lawyer to make up the best plan for yourself - you should have some stake in the marital assets and maybe alimony. Maybe you can work out some support at least until you can get on your feet. Maybe he can be SHAMED into that. Some other suggestions I might have would be if you have no friends or social outlet now, maybe you could join a church group or a women's group, something to have some social support. You don't see yourself accurately anymore, you're used to seeing yourself through his jailer's eyes, and you need to build confidence, social confidence and maybe job confidence. Depending on what your lawyer says, maybe you can get a small job now. I would also talk to some local colleges because you might be able to brush up on your prior degree and add to it or update your skills.
Other people will be along here with excellent advice and concern. You'll see that, it's a great site, with good people. People who've been through things like you. Don't mourn too much over this guy, he's not a great guy, he's actually been abusing you psychologically and keeping you like a doll - to your detriment. HE IS NO GREAT LOSS. That is my honest opinion. You need to get back on your feet and you can do better than him. These two deserve each other.
Right now though....I'd keep my mouth firmsly closed and listen to your lawyer. As for sex, I'd just develop a permanent case of the TIREDS....hopefully he won't bother you anyway, and get an STD test too just be to sure. But you're gonna be planning for a MUCH BETTER FUTURE THAT YOU WILL CONTROL YOURSELF. It takes time and effort, but it WILL BE BETTER and it will be YOURS. Good luck!