I'm interested in your description of being "held hostage" because of a friendship you can't live without. It's interesting because that is how monos often feel when their partner comes out as poly - held hostage because of their love for their partner, or their desire to keep their relationship intact.
To make poly work you have to get past that feeling and see yourself as doing something because of deep love for another person, or in your case for two people.
I can see how it would be impossible for her to go back to being your "friend". It's hard, but you say you're in love with her, so you only have two choices. Love her enough to let her go, or love her enough to share your husband with her.
The second option is possible I'm sure but you, your husband and C need to learn about polyamory and realize that coming to terms with it can be a painful process. You will all need to support each other.
It's taken me two years to come to terms with my partner's long distance SO. Now we are looking at adding a unicorn to our relationship, in much the way you have, except she was not my friend to begin with. I'm sure I'll have a whole new learning curve to explore. Good luck with yours, don't be afraid to post here and ask questions, it has been a great source of support for me.