Would I be right to distance myself from her?

To make a long story somewhat short, I am inlove with my best friend. She and I are in our 40s. This person is divorced and was involved in two separate and long term relationships that didn't work out. During those days, she lived in other parts of the country while my I never had a romantic relationship. During my life, I had female friends that I had a romantic interest in which never turned out in my favor. I am a virgin in my 40s. Although she and I never talked about us in the romantic sense, when we first started hanging out, she indicated that she wants to be careful about who she wants to be with the very next time. At this time, I am one of the closest male friends in her life. We gotten closer in our friendship recently, and she's all I think about. We hang out regularly, but it is platonic. Almost two weeks ago (since she tends to make friends very easily), she was talking this guy and some others at the bar. I was mostly silent because I figured she enjoyed attention from some of the other guys, and didn't want to appear jealous, jerky, pocessive, nor clingy. She invited someone over to my place who she made friends recently at the local bar where we were hanging out the other night. That might sound odd, but this person is one of our neighbors. The invite was to help her with the E-Books which has to be done through my wireless internet. For the past year, we've been "close" friends, I did a lot in my power to win over her affections. In many ways, she's been good to me and for me. While needing to go to bed for work (last week since she occasionally crash at my apartment until she was able to move her to her new apartment which is at the same complex), I decided to let this person hang out at my apartment since she was sleeping over tonight as I stated. While I had to use the bathroom the first time around 4 AM, they both looked almost surprised as if they were about to kiss. I was not sure, so I used the bathroom. Afterwards, I stayed awake pretending to be asleep hearing talk and occasionally mumble. I heard softly say "that I was at ______'s house." When I went to the bathroom the second time, it looked like they were wrapped around each other fully clothed as if they were petting for awhile. After using the bathroom which was something I really had to do to begin with, I noticed that they changed positions at my couch and acted like they were asleep. Now I am feeling hurt because of this. Right now, I am also feeling kind of foolish as well. Then after a few days, she invited over to her new place. We hung out, drank, and talked. Since there was no furniture other than the mattress, we slept together. Nothing happened other than us sleeping. I went back to the town I moved from overnight to check up on my relativie. The next day I went to her apartment to wait for the furniture company since we agreed to do since she was at work. Once the furniture was in, we went out to one of our favorite eating place. She drove me in my car back home since I had a little too much to drink. Then she walked back to her apartment. About 30 minutes later, I saw her car through my window driving behind the apartment complex. It had to be her car, due to the unusal looking tail lights of that model car that no other car really has. I was thinking she went to that guy's apartment to spend some more time, but maybe not. I am hurt at this point, and I am wondering would I be right to distance myself from her?