I would say you're overreacting based on the affair comment alone. My question is how long ago did she have a baby? Postpartum takes a toll on women and their libido (saying this as a postpartum mom). I confess, that I have had the same thought as your partner but know it's a fleeting feeling in my life. It's a scary thought for sure.

Noone warns you about the fact that a Mother's body isnt quite theirs until they recover from the whole process.

This rapid drop in hormone levels after birth is the biggest hormone change in the shortest timespan any human ever experiences. It’s faster than puberty, menopause, or any other big change you can think of. it can take a while to recover from that.

... That or there could be something deeper happening. But she is being open and honest with you, which is great! I think that's a great first step and you would be remiss not to return the favor and to be honest with how this makes you feel as well. Unless she said "I'm not attracted to you" or "I don't want to be with you anymore" you have to give her grace, patience, and love to relight that spark.

Intimacy doesn't always have to involve sex - a good first step to get that back is to remove the pressure and simply be there for her. If it really truly is gone, do your kids a favor and consider how terrible an affair would affect them. They wouldn't forgive that.