If he killed the conspirators, it would have been fine but even that would raise suspicions. Wiping out entire clans of people is never right, even if you feel like their leaders are plotting evil things. The evil schemes of powerful Jews drove Hitler to kill the ones who had little to nothing to do with any of it.
Konoha created quite a predicament and decided to just off the Uchiha when things backfired. Itachi wasn't a hero and doesn't consider himself such. Heroes stand up for people who are being wronged (e.g Uchiha's), they don't wipe them off the face of the Earth. No normal clan or ethnic group would sit around, trying to gain the favor of a government that doesn't like them and if they had the sort of power that the Uchiha had, a coup occurring was just a matter of time.
The wiping out of the Uchiha wasn't a matter of right or wrong, because if it was, they'd still be around.