Yes, I do think they realize somewhere deep down what they are doing is wrong, but the "high" they get from this new fantasy life is too strong currently.
I can't remember if I posted this already or not, but a few weeks ago when my W admitted to the latest OM, and after I had calmed down a bit, I went out and basically told her off. I know it probably wasn't the right thing to say, but I could have cared less at that point.
I said, "You know what, you might be destroying me financially, absolutely obliterated me emotionally, but you haven't killed me. In a few years after I've rebuilt my life, I'll be better than ever and happier than ever. You'll be lonely and just as miserable as you are now."
For the first time since BD #2 in May, she started to cry. I saw some shame and sadness in her eyes for once instead of anger, and she replied, "You're probably right, and I'll be happy for you". Then I just walked away. I haven't said much to her since. She will come home from work and rant to me about how she hates her job, etc. I just listen and try to understand. Then she leaves not long afterwards for the bar and OM. I wonder if she rants about work to her OM? I doubt it, she probably rants about me only.
Last weekend, my S was on a trip with his friend. When he got back on Saturday, he kept trying to call and text his mom. Then he came crying to me because she turned the phone off on him. He knows that when it goes straight to voice mail it is off - it was going to VM on the previous calls. He asked me why she did that and won't even text him back. I lied and said I don't know, her phone battery probably died. Oddly enough, that is the excuse she gave him when she got home eventually. Her lies worked when he was 6. Now that he turned 11, they don't work so well anymore.