1.
He did not slay everyone down to the last woman and child, he left one kid
2.
Yeah, great, beat everyone down, kill their leaders, and hope that they'll all see the error of their ways.
As if segregating them from the village wasn't enough, you're supposed to kill their leaders(which everyone would then know about) and hope that they won't rebel in the future?
Not to mention, if the whole thing went public(which it would, survivors would surely talk) then many of the previously ignorant villagers would see the entire clan as criminals, stripping them of any honor they had. So rather than have his clan face a dishonorable death in a rebellion later(which would still destabilize the country and allow others to invade), Itachi choose to put an end to them there and then, and take the dishonor upon himself.
I hardly call that they
easy way out.