You are caught in a moral conflict. Your heart says stay with this man, but your conscience tells you that you are harming his family. Here my view of infidelity. I know that most people blame the cheater and pity the spouse who is being cheated on. The reality is that the cheater isn't the 'wrong' party and the one being cheated on isn't the innocent 'victim. '
When an affair occurs, there is an unspoken, unconscious understanding between both spouses. One person unconsciously agrees to do the cheating and the other agrees to play the role of the one who is being cheated on. Playing these roles meets the needs of both partners as well as the needs of the couple as a whole.
For example, if a man has the need to play the victim--in order to release pent up anger from childhood--he may behave in ways that drive his wife from him and force her into another man's arms. Doing so enables him to meet his unconscious need to be enraged. Meanwhile, being driven away may meet the wifes needs, for any number of reasons of her own. The scenarios are endless.
The point is, this affair is meeting the needs of both members of the couple. They both have decided to stay together in this sexless marriage because this meets both their needs. He says staying meets his need to stay for this kids. I'm sure he is meeting other needs that only he can reveal. We can only guess what needs are being met for the wife through their current arrangement. Perhaps she obtains financial security, perhaps she, too, stays for the kids, perhaps she has a fear of intimacy, which is satisfied by their detached relationship.
The point is there are no victims, only volunteers. She is satisfied to stay in the marriage as it is. She could demand changes; she could leave, but she stays. That's her choice. On some level she is aware of what her husband is doing. She surely knows that he needs to meet his sexual needs somehow. She looks the other way and condones his behavior because it suits her to do so.
The bottom line is, you aren't doing anything to this woman. Your boyfriend has an arrangement with her and this arrangement is between the two of them. Their arrangement predated his affair with you. If he hadn't found you, he'd have found someone else. If you are willing to be with a man who is attached elsewhere and this scenario meets your needs, then so be it.
I think you need to understand why you want to have a child with him. Are you fantasizing that he would leave his wife and raise the child with you? Would you be willing to have the child even if he stays with his wife? Be clear on all your thoughts, feelings, and fantasies before you go forward with that plan.
He sounds like a wonderful man. One area that he needs to look at is the way he avoids as a way of defending himself. His avoiding telling you the truth for fear of losing you is worrisome. If he could hold back such an important piece of information about being married, it is possible that he might be untruthful to you in other areas, not because he's a liar, but simply to avoid painful feelings. Im encouraging you to be aware of this possibility.
I hope that my reflections have helped you to clarify your position.