It sounds to me like your DH's head is on straight. He likes her, he enjoys sex with her and her company but doesn't have any romantic interest in her. It seems odd that you think there is some reason that he should fall for her just because of this. From what you say, it sounds like he is the one person who is very clear on what he wants.
Let's say all your & family tell you "should" fall in love with a close friend because you're so compatible and obviously would be a great match, that doesn't make you fall in love with them does it? Just because sex is a part of the relationship doesn't alter that premise.
DH is not the source of her pain, her decision to keep being involved with somebody when she wants more than he does is her choice. I'm not sure how big of a problem it is for her - is she miserable most of the time? Regularly withdrawn because she's just hoping for a romantic word for him to brighten her day? Just said a time or two "wow i really wish he had romantic feelings for me too" and didn't bring it up again, but you guys are assuming that she's nonstop suffering? Have DH and Fiance actually had a discussion about the fact that she has feelings for him that he doesn't share? If not...probably a really smart idea so they can perhaps reach an understanding that works for both of them.
Obviously otherwise, one sensible choice would be for them to stop sleeping together. Now. You and OSO can explore your feelings for each other after a period of adjustment where you can see if it will cause problems more problems for his fiance than the pain it is worth. Fiance can find somebody to date who is more open to having a romance if that is what she is really preferring.
Happiness will never come to those who fail to appreciate what they already have.
Last edited by Anneintherain; 01-28-2013 at 09:56 PM.