RKTek,
You know the deal. If you're uncomfortable with the situation, you're uncomfortable with the situation. And, you are right to bail.
I do wonder, though, whether you're doing it prematurely. I'm willing to take a guess that she's not so much "longing" for this guy as she's had her ego bruised, just like the DJ technique of breaking it off first, resulting in her wanting him. We want that which we cannot have, yada. But, that is only because she has that particular perspective which, I believe, can be changed if you're able to subtly have her identify that dynamic.
This has even happened for me and I'm sure it's happened for you, too: I'm not interested in a particular woman, she's annoying, doesn't have this or that quality and I'm ready to break it off with her. She breaks it off first and voila! I'm interested in her! For no other reason! But, when I realize what the reason is, I'm likely to come out of my pseudo-pining quickly.
Now, without knowing more facts, one "big fat lie" may be enough to exclude her. But, I'm finding that there are always the big fat lies.
But, why wouldn't you keep her around anyway? My own personal opinion is that there ain't perfection out there and I don't want to settle for anything that is not perfect for me. And, I don't mean little things, I mean that there is plenty of psychosis, or lying, or cheating, or baggage, or just plain incompatibility. Given the state of things, I'm happy to have women around as shear entertainment and honestly don't expect to find that perfect LTR; it probably does not exist.
Your girl is at least showing *some* positive signs of being LTR material. It seems like once she's in a serious relationship, she finds it hard to let go. That can be a positive attribute. Otherwise, she's doing many of the right things.
I also wonder how much of these are "real" issues or your insecurities that are causing them to be magnified. Sometimes, the deeper one gets involved with a woman, the more insecure one becomes (of course) and the GREATER amount of "issues" seen. Direct corrolation.
Having said all that, you always have to do what's comfortable for you.