Hi, welcome to SI. So sorry you find yourself here.
To answer your question if your wife should leave that dojo.....a resounding yes.
My husband had an affair with a co-worker who lived 3,000 miles across the country, there was no way in hell I'd allow any type of contact ever again.
If you read many of the articles on this site, you will come to understand that NC (no contact) with the affair partner is boundary #1. Ever again, under any circumstances. Please scroll down and find SerJr's Tactical Primer, Boundaries and Consequences for Betrayed Spouses and Before You Say Reconcile, all great resources for newbies. Each is in this forum and has a target icon on the left-hand side.
My husband also is a 7th dan. I can tell you that being involved in karate takes up a great deal of time, it is very detrimental to the spouse and family. My husband owned his own dojo for years, and it had always been a problem in our marriage....too much time away from me and the family. You are right, there is training, conferences, seminars, all where men/women work out together, and then usually at these weekend events there are evening get-togethers, marrieds with marrieds/singles drinking and having a grand old time.
I want to add that my husband trained in karate for 37 years, after this sh*t hit the fan, not only did he find a new job, he sold his dojo.....for me and to begin the process of rebuilding our marriage. So if he can walk away after all those years giving up his life's passion, so can your wife. He gave up all of his martial arts friends as well, some of them he had been friends with since his teen years.
There are plenty of other dojos around, but frankly your wife has boundary issues, I don't think I'd trust her anywhere right now.
As for telling the other spouse, your counselor is dead wrong! The best way to end an affair is to expose it, besides his wife deserves to know she is living a lie, and she may have potential health risks from her wayward husband (STDs). ALL of you need to get tested asap.
An ugly consequence of infidelity.
Please find those articles, they are soooo helpful.
Edited to add: I don't want to generalize and say that people become wayard at these events, a good majority of them are fine, but I have found that many women/men in marital arts idolize the instructors, it could set the stage for boundary issues.
[This message edited by annb at 3:56 PM, February 16th (Thursday)]