I do believe they had/have genuine concerns for both populations, you bring up Bloody Sunday which I will use to make my point about the gloves coming of.
Bloody Sunday was not as bloody as it could have been but it was a very public, what they could have done was plant a number of bombs along the march route killing a few hundred. Then sat back and said nothing, the loyalist to would hold their hands up and said nothing to do with them. They could have did thousands of bombings like that but they never did.
Any town they suspected of supporting the IRA could have been bulldozzed to the ground and its population displaced.
They could have went for population displacement on a religous basis.
They could sent the army in its regular form, APC, main battle tanks, mortars artiliery, air and sea support with the order to do what ever needed to be done.
A Bloody Sunday very day for years.....
I mean get real they never went in all guns blazing and nor did they want to. But if they did they could have and not much could have been done to stop it.