why don't you ask her what she wants from you and her relationship to you, and see if it fits into your world.
as adults we set the rules, if we play by em then great, if not then time to move on.
rules, as in agreements btw. two mature people. having someone on the side for some adult fun is ok if both people are ok with it and know it. you said the chemistry is there and she seems to be hinting at it.
myself having had more then one long distance relationship i can say that having a lover on the side is good if everyone, and i mean EVERYONE, is ok with it. it gets lonely in a long distance relationship.
bottom line is, find out what she wants from you and see if it works for YOU. can you be her friend and/or lover and be ok with it?