So sorry for what your wife and you are going through.
But if I can offer a perspective from a mature (past 60) woman:
The prospect of losing a breast is not half as devastating now (let alone should this happen in my 70s!), as it would have been during my child-bearing years. There really is a season for everything and as we GGs age, we do place much more emphasis on our inner selves and on all the richness that life has to offer than on the exterior package. We no longer care so much about looking "sexy" at a party, or physically attracting a male should we become single again. Relationships in our 70s aren't nearly as physical as they used to be.
I dare say that the prospect of losing a breast is much more devastating to you as a crossdresser. CDers have always given me the impression they prioritize feminine things and female body parts much, much more than do GGs.
Of course no one wants to lose any body part, but I do believe that your wife was able to pull herself together quickly and sign the documents once she got over the immediate shock that she has cancer because was able to realistically assess the situation. In her shoes, I would be grateful that it is only a breast, rather than a limb, eyesight, or hearing. Prosthetics are readily available and no one will ever be the wiser, since a prosthetic breast is always worn under clothing. I'm sure your wife knows that you will not love her less after her surgery. She may be worried that the cancer might spread, however.
So please don't feel bad for agreeing with the doctor. Any husband who loves his wife would choose the option that would extend her life. Breasts really are negligible once we are past the lactation stage, which your wife has been for 40 years!
I would like to comment on one of your statements, which I have seen expressed in this forum by many members over the years, and which may be the cause of you feeling bad:
The first point: while it is true that some wives see the femme side as competition, it is more about a competition for their husbands'
attention. I've known many wives of CDers and a common complaint is simply how much more the CDing husband seems to enjoy the pretty things and dressing up, than simply the enjoyment of hanging out with his wife in guy mode the way he used to. Many wives feel that husbands prioritize the CDing over the wives and so it makes the wives feel sad (or angry).
The second point: no, no, no. I have never met a wife who felt that she could not "live up to" her husband's femme clothes or makeup. After all, these are things any wife can purchase for herself if she is at all interested in "competing" (which wives are not). Wives know they are women and there really is no competition between a GG and a CDer who presents as one. Nothing a CDing husband does will ever take away any GG's innate femininity.
An example: In my prior marriage, my ex had an affair with beautiful woman who was younger than me. Not once did her looks make me feel bad about who I was as a woman. I thought that my ex was a jerk for betraying me, but my image of myself was never affected by the way this woman looked. And she was a real GG! I disliked her for her lack of morals - her selfishness and callousness - she knew that my ex was married, and she knew me. I did not dislike her for her looks and I did not think myself less attractive just because my ex had sex with her.
So please do not project onto your wife how you think that wives feel about the CDing, as if your femme clothes/makeup/wigs/forms/jewelry/etc are somehow the cause of her feeling "less feminine", which you now imagine is compounded by the removal of her breast. This thought is more a reflection of your inner beliefs than her reality.
Just be there for her and tell her how much you love her and you appreciate her in your life. Don't even bring up the CDing, since it has nothing to do with the cancer she is facing. Although you might want to pamper her for a period of time when she recovers from surgery - I don't know what would work for you guys - breakfasts or coffee in bed? Making meals? Offering to do things that you know she hates doing? Surprising her with flowers or something else she would see as a treat?
I send my best wishes to you both, Leslie.