King Kandy,
Naruto defeated Pain fair and square. Naruto could have defeated Pain, with ease, after finding him. Pain said himself that if Jiraiya knew "Pain's" secret, the he would take him out. Naruto did know Pain's secret, had better mastery of sage mode and various other techniques. Naruto could also resist Pain's body control technique at point blank range...apparently a first for Pain. And, no, Pain didn't have hardly anything left in him. That last technique killed him. It wasn't some massive uber technique...it was more like Tsunade's massive slug separating.
Now, the reason Naruto convinced Pain...
Pain had an epiphany. Sure, Pain read the book before. However, the circumstances and what Naruto said caused Nagato to have an epiphany. Naruto's refusal to continue the path of revenge also played a large part in that epiphany. Once Nagato realized that all "pain" could end IF everyone tried to forgive, or at least refuse to take revenge, he realized that that version of peace was a far more righteous path of Peace than forcing peace onto others.
Also, the Konoha village people will have no problem rebuilding. Expansion jutsu can dig mighty lumps. Earth users can mold it. Woody can make all the houses. Kakashi can cut the cheese with chidori. Naruto can build the whole village with his Kage Bunshin no Jutsu.