UPDATE:
George just told me he has no recollection of this either. I can't tell if that's the truth or if he's trying to stay out of it. This makes things even more confusing for me......
I think George has done more than his part - leave him out of this.Confront the wife and based on what she says (and if you interprete her as lying) - Steve gets a beat down.
If Steve does not deserve the beat down - too bad. At this point he has screwed up to the point that he knows he deserves it.
The problem is, and forgive me if I am misinterpreting what I have read, that -1. the guy was told that his wife went into a stall with a known player
(who laughed when asked what happened)
2. he ignored the warning
3. the wife comes back with her stuff hanging out
4. he buys (or at least tells his wife he buys) the story that she can't remember anything.
This doesn't seem like the type of guy that is going to go administer a beat down to anyone. If anything he will probably apologize to Steve for his wife getting a bit too frisky.
There is an elephant in the living room and it is time you acknowledge it. Chances are at the very least they made out like a couple of hormone driven teenagers. Alcohol may have been the factor that allowed it to happen, but it happened nonetheless. The involvement of alcohol doesn't make it any less wrong or somehow acceptable.
Even if nothing happened (highly unlikely) a trust has been broken that will fester if not addressed. You said you are not sleeping and your gut feeling is probably right on. Even if it is not, perception is reality. hammer things out now or be prepared to be miserable for a considerable amount of time as the doubts will linger.