You tube, stop beating around the bush and give us the full dirt on this tricky situation that you're in.
There are loads of variables in a situation like this, one size does not fit all. For example, I have had a Sqn 2IC have a relationship with a Pl Comd - admittedly with a warning shot from yours truly - but no dramas or issues there whatsoever. Relationship gradually fizzled out with no impact on the operational effectiveness of the Sqn.
However, how would you feel if your CO and his 2IC were having a relationship? Puts a different spin on it, doesn't? Nevertheless, if you're a sharp cookie, you'll have picked out the key phrase in this monologue already and applied it to your situation. We live in enlightened times old son and people in institutions with a hierachical structure have relationships with each other all the time. However, if you can't conduct it with grace, style and maturity (see John Prescott) then you deserve to be sanctioned.