ARGH!!! I typed up a very well stated reply and hit the wrong button... Now I am going to wonder if I covered all my bases....
First and foremost, you have to tell her how you feel about having an open marriage. It doesn't matter if it upsets her or not. You are upset that she's had this emotional affair. it's not a tit for tat either, it's a married couple sharing needs and concerns.
Secondly, for him to tell her even once that she should pick him over her should be a huge red flag for both of you that this will never be a polyamorous relationship. Polyamory is about building the extended family in love, not picking sides etc... Picture having your wife in an exact duplicate. You wouldn't build one up more than the other and you wouldn't break one down. It's about love. If it's just about sex, it's swinging.
Thirdly (or whatever), RELATIONSHIPS PERIOD are hard. The hardest part is communicating needs and wants. The second hardest part is understanding that your needs and wants are sometimes not supposed to be part of a relationship (your wife needs to accept and appreciate that you won't have part of an open relationship). You have to make your needs known and listen and understand hers too.
I am speaking from the view of your wife as well. I am an ass who ended up having an affair (emotional and physical). I used to hate when friends would tell me about cheating on their wife or girlfriend. It was selfish of me but I can honestly say that I love both my wife and the woman I had an affair with. We no longer talk or hang out. I miss her deeply too. The people of this board helped me realize that I was being an ass and that I was wrong. What I did was not polyamory, it was cheating. I am working on my marriage now and will continue to focus on that until we are right. At that point, I may bring up my feelings and come clean to what happened.
I am also a person that understands that needs and wants change over time. There was a time when I would have fought another guy for looking at my wife with lust. Then I found that during our marriage, we agreed to swing with a married couple that we knew. I went from ready-to-fight to ready-to-watch. The odd thing is that even with swinging, I didn't think I could ever love another woman like I love my wife. We had a hardfast rule while swinging, no kissing. That was because it was so personal and could lead to emotions etc... Well, here I am now. Telling you that I am a convert and know that for a fact, I love two women. In the few short months
There is an EXTREMELY SMALL chance that if you and your wife discuss this out completely you may find that you have changed too. You might find that polyamory isn't bad for you both (but not with this guy) and take your relationship to a whole different level. Even if that isn't the outcome, at least you will have discussed it and understand eachother.
Finally, You mentioned that your counselor made reference to "it was me and my not meeting her needs". You either need to find another counselor or listen more carefully to what they say. Unless you said that you were clearly not providing a need (I don't hold her, I don't kiss her, I don't tell her I love you) it sounds like they already chose a side (wrong for them to do) or you didn't listen to what they were saying. Either way, communicate, communicate, communicate with your wife. If whatever counselor you choose tells you differently, find another one. That should be (and will most likely be) the focus of your counseling.