I wish more people had the opportunity to read my signature... because it spouts nothing but truth. I've gone to bed with quite a few cheaters, but I'd never willingly jump into a LTR with any single one of them.
On one hand, you messed up by using the ultimatum path on her... when she clearly was okay with basically being FWB and you being the side guy. There's nothing wrong with NOT wanting to be that... but the last thing you want to do is turn this into something serious. She obviously doesn't take her current situation seriously, so why would she be the same with you?
"What the hell is different, if she cheated on him, she'll do it to you."
On the other hand, you probably saved yourself from an eventual heartbreak by issuing the "ultimatum". You are better off moving on, you don't know how to separate your emotional side from your sexual side in this scenario.
Until then, you are better off gaming other types of girls.