Itachi169, I am going to use your post as my starting point for my "Is Pein Overconfident" post. Hope you don't mind.
Alright, first of all, lets reexamine everything that Pein has done that we know of, in regards to Konoha:
- He killed Jariaya, a legendary ninja and a master of senjutsu (even if his Sage form wasn't perfected)
- He fought, and won, against MANY of Konohas most skilled shinobi.
- He obliterated Konoha, at the very least most of it.
- He, in a single move, crushed, killed, or maimed the STRONGEST frog in all of Myobokuzan, Gammabunta, and the other two are probarbly considered the second and third strongest. You definatley bring your 'A' game against Pein.
- He has killed Fukusaku, Pa Frog.
- And now he has Naruto Uzumaki, the Shinobi who, just a few threads ago, everyone was saying was the strongest ninja in Konoha (and rightly so because they are vesting all their hopes into him), in a very precarious position.
Lets not forget that even though all of this must use up a substantial amount of chakra, Pein still seems unphased and confident.
Pein has pretty much neutralized every single major threat Konoha had against him. The sword running through Naruto's hands is no ordinary sword, I'd venture to guess it is a legendary sword.
This sword is really something. It makes the reciever of the pointy end (i.e. the one getting stabbed) lose all control of their chakra. It also disrupts sage mode. Now, before you argue with me on this point, I will cut you off at the pass. We see in Pein VS Jiraya that right after he is stabbed, he lost sage mode. This makes sense because: If yu can't control your own chakra how do you expect to maintain a balance between your chakra and nature chakra?
I would also venture to guess that it disrupts the flow of Bijuu chakra as we'll.
Lets not forget that when Naruto said something like "At least you're the last one!" Pein responded "Not exactly." And while I'd put money on the fact that he was reffering to Nagato, we cannot say for sure just yet.
That being said, we must remember that Pein knows nothing about the possible discovery of his secret by Ino's father.
That being said, I realize this is aterribly flawed bad-guy stereotypical ritual and usually ends up being their undoing.
That being said, it probarbly will be.

I just think that Pein has every right in the world to feel as confident as he does right now, even if it is a stereotypical mistake and probarbly a huge blunder on his part.