She definitely is confused, and your husband seems (only from what you’ve said here) to be handling it the best he can. If everything is on the up and up, you have to consider how uncomfortable the whole thing is for him. I’ve been in a position of authority over someone who had a crush on me, and it is not an easy situation to navigate.

You have every right to be frustrated with her and to seek clarity from your husband, but take a step back and ask what he could possibly do about it without jeopardizing his own position. He needs to be extremely careful not to lead her on (and she isn’t necessarily taking any hints) and constantly be on guard for some sort of false accusation. Every time he deals with her in a work related way he needs to consider this extra baggage she’s carrying and how she’s going to interpret his actions. This walking on eggshells must be taking a toll on him as well. If he also has to consider how you will respond to their interactions, it only adds to the stress.

Keep the lines of communication open, give him the opportunity to discuss it frankly with you, and try to take the view that your husband is a good guy, they are hard to find, and it’s normal that other women who don’t have the same might recognize that and envy/covet it. But he is a good guy from what you’ve said so far, and unless you have a specific reason to be suspicious you can trust that.