Is this a serious form of cheating?

Obviously, she is at least making attempts to stay away from your husband. Perhaps she has reevaluated her own marriage/relationship now that she's had a child. As for your husband, I think it's more than sex on his part, I think he is in love with her. He may love you in his own way too but he needs to be with her. If it were simply sex, he could and would find it elsewhere.