Question: What if they were to destroy the Matrix, then all the humans would be free but the problem is where would billions of human beings go? Zion, the last city, can't hold them all and they can't live in the tunnels or above the earth's crust because there is no food or water there. The whole war doesn't seem to be well thought out and seems like a big plot hole on the Wachowskis part.
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Answer: The inhabitants of Zion seem to have little problem with killing off dozens of 'real people' during their constant gunfights inside the Matrix. This suggests that they would be willing to sacrifice the bulk of humanity. Remember, it's supposed to be difficult for adults who spent their entire lives in the Matrix to survive being suddenly removed from it anyway.
J I Cohen