Wa Alaikumus Salam Wa Rahmatullah
The issue of Musaharah is a very sensitive and complicated one. When a man touches another woman with sexually desire who is not related to him by blood then they establish the relationship of Musaharah. In this way for both of these man and woman, immediate relatives of each other such as daughter, son, father, mother etc... become Haram upon each other. Musaharah may become established even by touching a non-Mahram woman with sexual desire. If a man touched a non-relative woman with sexual desire and the touching was skin to skin then Musaharah becomes established without any doubt. If the touch was not skin to skin but it was through some kind of fabric or clothing then Musaharah is established if the two were able to feel the heat of the skin beyond the clothing. If the heat of the skin was not felt beyond the clothing while touching then Musaharah is not established.
In your particular case, based on what you have described, Musaharah has been established between the man and his mother in-law. Now this means that must terminate his relationship with his wife forever. Now they will never be able to marry each other because once Musaharah becomes established then it remains in effect forever.
ثم المس إنما يوجب حرمة المصاهرة إذا لم يكن بينهما ثوب أما اذا كان بينهما ثوب فإن كان صفيقا لا يجد الماس حرارة الممسوس لا تثبت حرمة المصاهرة وإن انتشرت آلته بذلك. وإن كان رقيقا بحيث تصل حرارة الممسوس إلى يده تثبت
الفتاوى الهندية ج1 ص 303
And Allah knows best.
Mufti Ikram ul Haq
Fatwa Center of America