I think you did the right thing in that lunch conversation...and what you suggested makes a great deal of sense to me. Have her move out ...let everyone take a break ...pull back a little to casual dating and explore how you to move forward. Really smart play...good job.
I'm little confused ... She can't imagine you dating or bare the thought you being sexual with others but it OK for her and the other guy.
Sounds like this other guy is poly ?...is that correct. If so how many relationships does he have currently? And why is that OK?