My girlfriend told me that she cheated on me 2 years ago. What should I do?

I've been with my girlfriend for 3 years and a few months.  Up until now, things have been great and we connected really well.  It is (was) the best relationship I've ever been in, and all indications are that we were headed towards getting married.

We met at campus, when I graduated i moved elsewhere, so we are in a distant relationship for now. A few days ago we were talking about something really personal to me, but then she called me the next morning and told me that she had cheated on me 2 years ago -  1 year into the relationship (we were exclusive already at this time and everyone knew).

She was at a party with some of her friends (a few of them were close family friends). On the night, they had drinks, and then went to another party close-by.  She ended up dancing with a guy (close family friend) that i also know and have hung out with a several times. She says they were all pretty drunk at the point when they left together. She lived in a student block about a 10 mins walk away from the party and they walked together to her hostel (where i had stayed plenty of times as well). They both new that her and i were together and they still slept together.

She says he didn’t stay over but i don’t believe it since they dated when they were younger but never went any further and she knows his dating history. I played rugby with him at campus and we also went on a group holiday with the guy and some our friends (after they had slept together). I was also her first and asked her the reasons why she did it and she said it was she didn’t feel close to me at that point and that it was 'unfinished business'. She only told me this after 2 long years and the worst part is that they're families’ hangout together a lot and it would mean i would be seeing him a lot at her family events.

When she told me, she was upset. She said she wanted to tell me earlier, but was scared, and as soon as she got back things were so great with us, she was just hoping it would "go away."  I don't know how to take it - of course I'm hurt angry, confused and betrayed, but on the other hand things have been so good with us for so long, does this really matter?  I had absolute 100% confidence in our relationship but when I think about it and picture them in the bed i also slept with her for 3 years, it makes me crazy and turn into the hulk. I still love her but feel like it’s completely destroyed our relationship considering i know the guy well, i was the only guy to be with her until that happened, we were open about everything but now wonder what was real And also the families see each other all the time.

I guess I'm just looking for opinions - I’m finding it hard to forgive her and trust her. Has this happened to anyone before?