Hubby and I have been through much the same situation as you have from Jan of this year until a few weeks ago.. The same person and scenario you describe to the T..
I encouraged poly, and accept all forms of it. When Hubby (nutbusterx on here) decided to pursue a relationship with a co-worker I was very encouraging. At first she told him she had broken up with her bf, but we eventually found out that she was less than honest. Hubby broke up with her twice over a 2 week period with her continuing the flirty texts and flirting at work etc. I was the one that actually encouraged him to stay with her and continue to try to talk to her about being honest with her bf.
I had lunch with them once and all my insecurities came crashing in on me. She is everything I am not and gorgeous. But with hubby's help and reassurance I got through it and feel alot better about myself and my ability to work through things.
Hubby ended it finally about two weeks ago, after we had talked and talked about the emotional roller coaster we had been put through with her telling us one minute she would be honest and promising it to talk to her bf and the next saying she was taking a break from him, then the next saying she couldn't talk to him just quite yet.
We had the no cheating rule, but like your situation ours went fast and we told her she would have to be honest and in the end she admitted she wasn't interested in being honest.
So this situation didn't end well, but I know that being poly is right for us. We learned alot about each other, our relationship, and our selves..
I sympathize with you though I have just gone through the same situation and quite frankly it's a relief to have it finally be over and not have the daily roller coaster going on..