By "condone", do you mean "condemn"? I think you must (at least I hope you do) because otherwise I'm afraid I'm a bit lost. Anyway, it certainly was straight-up incest, no doubt about that. Ted and Remus were both fully aware of what they were doing. As for the cheating, yes, I believe they were both being unfaithful to their partners, but to them it was something special, something set apart from an everyday "affair". Remus's scared moment when he thinks Sam is in the house it, I think, a prime example of the unfaithfulness. Remus knows, even if it's "only" with Teddy.
I'm quite glad you liked the fic! Thanks for your thoughtful comment!