When is a relationship not a relationship?

Hi if anyone can help me with this one or offer a clear perspective I would be grateful.
I have been seeing this lady for a year and its basically going well except for a few things that are bugging me..
After a year we are still above the shoulders...

and below the knees so to speak, with not even any hint of intimate touchng or anything. The closest it has got is when she mentions that she's cautious due to gyno issues and past abusive boyfriends. I've told her that I wll never push the issue of sex, that when she feels comfortable with it it will happen.
One occasion when she was drunk she said that she loves me like she does her friends, that she doesnt think she has ever felt love for any of her partners. She has kids, doesnt want any more and will refuse to her dying day to marry ever again. Just recently she kind of admitted that we are boyfriend and girlfriend but apart from that nothing else has changed. One hears talk of mixed messages but doubts it will happen to them.
Dont get me wrong I dont just want to get into her pants - I want to be intimate, theres a difference.. Its the next level and I wonder if it will ever get there..
Im so confused, I dont know what to make of it all. My friends keep telling me to dump her but I couldnt ever bring myself to do anything to hurt her. I do love her very much and am involved with the kids now too, they like me heaps and would also be upset. In her list of priorities I'm more or less at the bottom below reading, television and the cats
*Shriek* what to do..

Err... When the computer or television is a higher priority than you. She obviously isn't going to do much besides use your cash to buy stuff most likely. And also.. When you are drunk you let things you keep to yourself slip slowly. So, As she said she doesn't truely love you. Or ever want sexual interaction at all now or in the future without you pushing heavily for it. So... Either set some standards and talk with her about how you feel about your Place on the list Or... Yeah. Dump her.

I agree wit emeruby , just dump the chick she has definitely played you for a cash cow and nothing important other than that. so just take your cash and leave, you can easily do better than that skunk bag!

I find it interesting that none of the female contingent has had anything to say on this.. come on ladies, your perspective would be very helpful..