Naruto killing the villagers would mean a complete shift in his values. He'd have to re - evaluate his beliefs in friendship, forgiveness, and the importance of the village. His new self would be shaped by the horror of his actions, and he might struggle to find a new purpose in life. He could either sink into despair or try to redeem himself in a very different way than before.
If Naruto kills the villagers, he would lose his innocence. He has always been about protecting and being accepted by the village. Killing them would make him a much darker and more complex character. He might become more of an anti - hero, full of guilt and self - loathing.