We all get a thrill out of being wanted, and he wants her, so she's thrilled.
We all get security out of a loving partner at home waiting for us, and she's got at, so she's secure.
Right now it's a joke and a giggle that he wants her (to her). He's still chasing her though, and her moral sense already accepts that what she's doing is not cheating, when you clearly think it is - check out the "what is cheating?" thread.
I think that her boundaries will gradually slip until she has sex with him. She may well have done already - I've seen the joking turn real faster than you'd expect.
Personally, I'd want to talk to your wife's co-workers and the man's wife. If she's banging him, her co-workers will know, and if she refuses to let you talk to her co-workers then she's banging him (from experience in my social circle over many years).
If the worst happens, go nuclear and tell his wife that he's trying to fuck your wife.
If you want to spy on your wife, you can look at her phone bill and see how often she's calling and texting him, or even read her messages - not that I advocate such breach of trust, but if it uncovers marital infidelity, then at least it means you get more than she does in the divorce.
I really feel for you in all of this, but I think that your marriage is not on equal terms any more (if it ever was). You look after the home, and she's out till all hours drinking and getting hit on, and maybe screwing her co-worker(s).
You need serious profession grade relationship help, locally, and involving your wife voluntarily.
Unless you can sort these issues out, all you are doing is enabling her bad behaviour. In essence, you have a strongly co-dependent relationship, she needs you at home (regardless of whether she wants to actually BE with you) and you need her to have your ring on her finger (regardless of whether that actually MEANS anything to her.
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Overhead, the Albatross hangs motionless upon the air,
And deep beneath the rolling waves,
In labyrinths of Coral Caves,
The Echo of a distant time
Comes willowing across the sand;
And everthing is Green and Submarine
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