In my opinion, the biggest problem of wiping out the entire Borg race is the fact that the assimilated drones can be severed from the hive mind, and thus saved from the Collective.
Exactly. Hugh is proof positive that the virus would be total genocide against his race. Killing all of the Borg would be killing billions of Hugh's.
A military encounter, i.e. Starfleet and Borg ships fighting each other, is different, because that operates under the rules of war. If a ship is attacking you, you have the right to shoot back. But not to wipe out the entire species. That's wrong.