I don't think they were ever going to fight to the death. Naruto told Itachi that he would somehow find a way to protect both the village and Sasuke. Apparently this now has something to do with the position of Hokage. I don't see the Alliance just disappearing after the war, so clearly there has to be some sort of unified government system.
If this truly is the end of major conflict, then there really won't be a need for shinobi, either. Maybe as potential peace keepers or to protect against regional threats, but the whole purpose of the separate villages is to protect the nations from each other. Perhaps, some sort of tribunal system will develop after the war. One in which Naruto, Sakura, and Sasuke all will play a role.
Thinking about it though, Naruto and Sasuke are technically both Genin. There has to be something in place that would require them to achieve higher ranks before being considered for Hokage. Maybe, their "final" battle will be as part of a new Chunin Exam in which they face off in the final round. They wouldn't be able to fight in a village, because their basic techniques would be too destructive. Imagine if Naruto had been able to summon Bunta during the first Chunin Exams like he had originally planned. Add in a completed Rasengan arsenal, Naruto's various modes, and Sasuke's lightning and Sharingan arsenal. They could easily level an entire village on accident. Therefore, they would have to fight in a location that is far away from any village, and the only logical place in the Land of Fire would be the Valley of the End.
