Hi. Just wanting to get some feedback on my concern. My wife and I are 53, married for 8 years.when we met she worked and lived an hour away. She constantly talked about 1 married male co worker (very cocky acting). I found it irritating questioned it and it finally faded away. The past 4 years she has left that job and has been working in our town, but still returning to her town 4-9 two days a week to care for her elderly mother.

Last week her mother passed away. At the viewing, she noticed that her old co male worker had sent flowers and broke down crying. A few minutes later here he walks in. They stood across the room holding hands for 20 minutes talking quietly, and a hug and a kiss when he left. Found out his wife had died a month ago. Being curious saw his # is in her contacts on her phone. I ask myself why the hand holding and why is his #in her contacts? Am I being ridiculous or should I be concerned? My 2 married kids say that's just wrong and very weird.

OH NO there is NOTHING wrong with her behavior or his.
Old friends need to be able to hug, kiss, hold hands when grieving. She lost her mother and he lost his wife. I highly doubt that the kiss was prolonged or passionate - RIGHT???

Of course worry is normal, but we all have to curb our jealousies every day. We do it for the sake of our relationships.
I suspect that your kids are hearing a slanted version of events from you. It's easy to tell a story any way we want.

If she and he were getting ready to start some sort of romance, they would have acted secretive. She would have hidden his contact info on her phone. She is being honest and straightforward because that's all it is!

You can drive her away with jealousy, you realize?
The self fulfilling prophesy is something I and many others know all too well.

Am I being ridiculous or should I be concerned?

You should be concerned that you are being ridiculous. Especially telling your kids.