Yes I have seen that episode, I heard it was one of the best episodes in a long time, it also showed Madara's PS which is something I wanted to see colored and animated. But I have also read over the parts regarding Itachi at least 5 times and have read the entire manga thrice. I don't just base my opinion off the most recent anime.
You are right, the kids knew nothing, but even if the village tried to play it off as nothing the Uchiha clan is smart. They would think something is up when only the adults are killed. They would wonder why only the adults were killed and would realize the truth. And even if they didn't harbor any resentment toward the village, leaving so many alive, there would be a high chance that at least one would find out and tell the others. Then their emotional pain from their parents and older siblings deaths would turn into hate for the village, and likely start a war. This is what Danzo was afraid of had Itachi kept the children alive. Hiruzen realized the children would also have to die, but he didn't want to say so in front of Itachi. You are right though, things could have turned out fine, but I don't believe they would have (Not with how the Uchiha has been shown to hold grudges and hate others).
It's great that you've read the manga so many times but you only have to read it once to know that the info you provided on why Danzo had Itachi kill the children is something that was only revealed in the anime, not the manga. Without the anime that recently came out and purposely gave a flashback where the kids were specifically mentioned, you wouldn't have come to that conclusion on your own, no one would as it was the first time in manga or anime that the other children of the Uchiha clan were ever brought up. Before that anime no one was thinking of the fact he had to kill innocent kids too.
Yes, the Uchiha clan would've thought something was up. They would've thought that Itachi Uchiha killed all their parents and spared them because they were kids. Sasuke would've known nothing of the coup de tat had Obito not told him, so I don't know what makes you think the children would've just magically discovered the truth on their own. As far as your comment in regards to Hiruzen, that is exactly why I originally pointed out that the connection between the anime and your comment. Nothing in the manga suggests that Hiruzen felt the kids needed to die. In fact, the anime itself didn't even suggest that. When Hiruzen spoke for himself, he believed firmly he could reach a compromise with them and stop it with words. Nothing suggested he felt killing the kids was needed. Also I'd like to point out that the anime makes it seem like the sneak attack was all Danzo's idea while the manga makes it seem like a joint effort with Hiruzen's involvement.
And I never said everything would turn out fine. In fact I said the opposite. Attacks on the village couldn't be avoided because that's what the ninja system makes happen. The leaf was still attacked twice. I'd also like to point out that after the Sand Village attacked, even while the leaf was still rebuilding from all of that no other village attempted to attack them, so this idea that a civil war would've lead to other villages trying to take advantage of the leaf's so called weakened state isn't supported by any evidence. I'm sure you know that though since you read the manga 3 times and all. Itachi could've killed the adults, left the kids alone, they would've grown up, all been angry at Itachi, and probably more loyal to the leaf than their parents were as the leaf village treated Itachi as an enemy too. The enemy of my enemy is my friend. I'm not trying to convince you of anything ofcorse, you're free to believe what you want.
