Natsu's anger wasn't really centered on Sting and Rogue though. For that fight he just wanted to prove that Fairy Tail's way was better than Sabertooth's, and for that his showing off made sense.
And this then show that Natsu's desire to show off defeats 2 3rd generation DS who are fighting a bigger cause than personal gain.

Yes, it does kill all of the build up. I don't think that is necessarily a bad thing. It established that Sabertooth is not the main opposition and that the festival was just a small part of a bigger plot (and that was foreshadowed heavily beforehand). I'm surprised you haven't picked up on this, LaZodiac, since you tend to be so genre savvy - tournaments on shounen manga are rarely played straight, to the point that the tournament being interrupted by X is pretty much a trope on it's own. Sabertooth and Raven Tail were decoy antagonists, that has been clear for quite a while now. Did Mashima spend too much time building them up? Maybe, but we don't know if they will play a part on the actual arc.
And there is still no reason whatsoever for doing this, it destroyes a lot of atmosphere and buildup, and thats all it does, there isnt anything else addet in its stead.
That there was something building up in the bagground was forshadowed pretty heavily, so to start with there wasnt any reason at all for destroying ST as a credible threat, and at the same time it then also managet to completely ruin the buildup that had happend since the start of the timeskip, with the magical world having moved on and evolved to a degree where other guilds would actualy be able to pose a challenge towards FT.

But now its hard to take anything at all seriously, since Natsu and Gajeel has now displayed a level of power that would allow FT to take on all the other guilds in the tournament and win.

For all we know, they might befriend FT and then die, being the people mentioned in the letter Levy sends Lucy. In fact, I'd bet money on that, even - I'm pretty sure all dead people mentioned are not from the guild (or just joined the guild for the purposes of being killed off). He used the festival to create some new characters, give them some spotlight, get them some fans, so as to be able to kill them off and have an emotional response. Sacrificial lambs, if you will.
And again, this has nothing to do with, and could easily be done without, worfing the entire magical world into oblivion.