I [23M] and my co-worker [36F] have been dancing around each other for months but i dont know what to do in this situation?

TLDR: The girl i like wants me to be the side piece, but I don't want to do that, and simultaneously don't want to break it off.

I developed quite the crush on one of my co-workers, S (36F) about 3 months ago. I later found out that she was also interested in me, directly from her. Here comes the issue; she is in a relationship of about 1.5 years. I knew this before I was interested.

We started talking in early January, and there was some light flirting, but I will freely admit I didn't know she was interested, so thought she was just being nice. I found out about 3 weeks later that she was interested, when she admitted as much after I explicitly asked her.

She works opening shift, whereas I work closing at the same store, so we rarely see each other at work, therefore decided we'd try and do some hangouts outside of it. We both smoke we*d, so we would have a session together every so often after I finished at work on her days off. We have done this 4 times now. One major issue is that I was under the impression that her partner knew about these sessions; I found out that he is in fact, not, and that she has been sneaking out after everyone else is asleep.

S has also been quite clear that she is physically interested as well, as, according to her, her needs are not being met at home. I have rebuffed each time she has asked/offered more. And then we come to last night.

Prior to this point, the most we'd ever done was hug goodbye after I had walked her to the corner of the main road in town, as I live somewhat rural, and its not lit from my house to the town, and I don't want her walking alone at night. Well, last night, she kissed me for the first time. I should have stopped her, or pushed her away, but I did not. I let it happen, and was very much a willing participant. Yes, I was h*gh at the time, but I was well aware of what I was doing, and chose to go along with it.

Once she told me she had got home safe, as is normal on these evenings, she made it clear that she wanted more from me, and that she was hoping I would take one of the multiple openings she had given me over the course of the few hours we were together (I did notice every one of them, I just had enough of my wits about me to think about it but do nothing). I drew a line, and said that, quote, "We cannot go all the way baby, no matter how hot and fun it would be". We then spent about 20 minutes.... discussing... why we can/cannot. She even threw out "what one doesn't know, doesn't hurt".
I did eventually 'win', if you can call it that, and she was clearly a bit put off, and still is. She has agreed that we can just be neutral, and just be friends, but that's not what either of us want, and therefore not likely to hold in the long term.

What exactly should I do in this situation? I personally see 3 options.

1) Just give in and go further. This is theoretically one, but realistically I cannot be a homewrecker, and I don't have the will to go through with it.

2) Issue an ultimatum. I also don't want to do this, as on the off chance she chooses me, it also tells me that if it happens again in the future, what she will do.

3) Just cease contact; be it ghost and disappear, or explain it and leave. I don't really want to do this either.

So, has anyone any advice they can give? What should I do here? Can anyone offer an alternative option to the ones I've suggested?