I don't think that solution was practical from a PR standpoint. You can tell in the film that they are always on pins and needles about building schools, offering them medicine, whatever it takes to get the goods AND come off as the nice guys. These are not government operatives, they are corporate mercenaries and it's likely any over-the-top violent action would get their colonial charter pulled and their mineral license revoked by Earth-side government.

A little strip mining in a remote location is probably not going to get anyone excited. Ticking off the savages enough to get them to launch a full scale invasion is going to throw up a bunch of red flags for the Amnesty International of 2200. Nuke them from orbit would be off the chart unacceptable. Perhaps they were autonomous from earth enough to do it and then have severe repercussions after the fact, but it didn't really look like smashing home tree had much support from the ground staff at the first anyway. With the colonel dead who would push that button?

That was the single largest plot hole of many others.

"Nuke it from orbit."

I think chemical/biological warfare is MUCH more likely. "Unobtanium" can't get sick.

I'm sure they'll nuke it from orbit in one of the sequels.