Okay first half of your post probably belongs in the Phase 9 discussion and you might want to try a better (more descriptive title for your topic in the future than "ZOMG GSD NO WAY!!"
The biggest point of conflict in Seed is the Coordinators vs Naturals thing but that hardly means wiping out one side would end war. Even in Plant at the beginning of Gundam Seed they hinted at racism between Coordinators when one person refered to him and his crew as the "Bastards" or first gen Coordinators. (I'm running off the memory of an Animejunkies fansub here so might be off...). Destroying the Earth changes the battlefield and pretty much nothing else. They'll still find something to fight over later on. What Seed needs is a freaking UN....