Wow, thanks everyone. this is exactly the kind of discussion I was looking for.
You guys have given me a lot to think about. I dont think I had fully thought about the fact that if this relationship were to move forward and then break off, I wouldn't have my pal to run to for comfort. That would be pretty hard for me. Given that I consider them both invaluable friends, it might be a good idea not to complicate things.
On the other hand, this kind of feels like the sort of thing that won't stay secret for long. Like I said, it really seems like its a two way street. I havent and wouldnt do anything improper, but theres a type of flirty energy between us that is hard to mask and that I really doubt my friend hasnt picked up on. So the question there is whether its better to leave it as an open secret, ignore it till it goes away kind of thing, or bring it out in the open so we can all talk about it. My gut says its better to be open, but there's enough at stake here that I need to really think it through first.
I dont think Wife would be offended if I talked to my friend first but I do think my friend would feel betrayed if I talked to her first. I really like the idea of sending them a letter at the same time. That way they have whatever space they need to talk about it or have whatever reaction they have to it, and I dont have to go through the really intimidating experience of declaring myself to their faces.
I agree that the most important thing is to be very clear that I value the friendships over everything else and that if nothing comes of this everything will still be fine. Thank you again for all the great advice.