The Fed could basically convert the bonds into dollars in an account with the treasury - which is completely asset neutral. The bondholders before had extremely liquid bonds which are basically cash-equivalent. Now they have cash. Basically moving from one column in a spreadsheet to another, and suddenly the debt is gone. Yes, there's still a liability, but only in the same way that deposits in a bank are liabilities to them.
Would it create inflation? No, why would it? Inflation happens when money is spent (which happened back when the bond was issued, because it was probably issued in the same amount of Government deficit spending), and since the transaction is asset-neutral, it wouldn't necessarily change any of the bond-holder's spending patterns.
Of course, the thing at the end of the day is that people have bought those bonds because they want a safe interest-bearing instrument. The central bank or Government of a monetarily sovereign country doesn't really need to issue them to deficit spend, it's more that there's a lot of demand for them to exist...