I like the first idea, that bringing balance to the force was destroying the Jedi. After watching episode 1 I thought it might go that way. But it seems that the general idea is that destroying Palpatine is what brings balance. Just killing one Sith.
Not just one Sith, but a Sith who had successfully consolidated power, become the unchallenged ruler of the entire galaxy, and totally broken the Jedi's power aside from two survivors who went into hiding and might as well have been dead. That sounds pretty imbalanced to me. Anakin/Vader not only destroyed the Emperor, he gave birth to, and then saved, Luke Skywalker, the first of a new breed of Jedi, who then went on to restore the Jedi order.
See, I'm not convinced that "balance to the force" means an equal number of Jedi and Sith, even though I mooted that as a possibility above. I don't think it's a balance when good and evil are equally matched. That's a Western, Manichaean school of thought that doesn't fit well with the Eastern philosophies Lucas used as the basis for the Force and SW spirituality. To me, good is balance and evil is imbalance. Evil is what happens when the healthy balance (whether of the psyche, of law, of political power, or whatever) is disrupted -- it's like an illness, a breakdown of the way things are supposed to work. When the balance is restored, things are healthy and smooth again and less harm is done.
The purpose of the Jedi was to preserve the balance of the universe, to preserve peace and justice and safety. Palpatine disrupted the balance by usurping political power, turning the Jedi's focus toward war, and eventually destroying the Jedi; and there may be some merit to the opinion that the Jedi were already out of balance before, that they'd become insular and hidebound and weren't really serving the balance adequately anymore. That's the sort of thing that can plausibly happen to any institution that's been around long enough, and it could be that the ossification of the Jedi was what allowed crises like the Trade Federation conflict and the rise of Palpatine to occur in the first place.
So that would make it a classic cyclical "rise and fall and rise" narrative -- a society reaches great heights, then grows old and stagnant and must collapse and suffer through a period of decline before it can undergo rebirth and a new order. That's a tradition of both Western and Eastern historical thought. Maybe the idea is that the institutions of the galaxy needed to be purged completely and restarted from scratch in order to be revitalized. Anakin/Vader achieved both halves of the process: he burned away the old order and gave birth to the new order. And thus he was responsible for both of the steps necessary to restore balance to the living beings of the galaxy, and thus to the Force (since the Force is the sum total of the life essence of all living things).
Of course, this hypothesis only works if you disregard the Expanded Universe, since I gather that in the EU post-ROTJ, there's not a new era of peace and balance, but just a repetitive series of more wars. But I think it's compatible with the two film trilogies, and provides a possible answer to how
both the destruction of the Jedi
and the killing of the Emperor could be parts of the fulfillment of the prophecy.