I think the problem with dating someone who is separated is that there is a risk of them deciding to stay with their spouse, especially if they are living under the same roof.
As for legal vs non-legal separation, well I don't know about state laws everywhere, but in California, there is no real reason to do a legal separation. The cost for doing this is the same as divorce, so you might as well divorce. And yes, a lot of people remain married for financial reasons and delay divorce, especially in this economy. In fact, I am one of them (though we don't live together anymore).
I would suggest if you get involved with this man, you verify everything he tells you about his dating availability with his wife, and if she doesn't mind hime dating, then I don't consider it cheating.
Relax... I'll need some information first. Just the basic facts - can you show me where it hurts?