OK a few points.
Roughly 10 million chinese civilians died at Japanese hands during the war ( http://en.wikipedia.org/wiki/World_War_II_casualties ). This averages out to Hiroshima or Nagasaki every month from 1937 to 1945. If you can stomach it, read "The Rape of Nanking" by Iris Chan for details.
The idea of demonstrating the bomb was dismissed for the simple reason that nobody thought the Japanese would pay much attention to it. If they wanted to know what the US could do to them, they needed only to look out the window. Fifty-seven square miles of Tokyo had been destroyed by the time of the atomic bombings. (Source "A Torch to the Enemy" Martin Caidin)
It is hard to sort out the so-called peace feelers. Some attempts were made, but the US could not determine if they were individual efforts or officially sanctioned. There was a sizable military faction that wanted to continue the war, one group even tried to overthrow the government after the atomic bombings and after Hirohito recorded his surrender message (source "The Last Mission" Jim Smith and Malcolm McConnell)
Was the bombing an atrocity? I don't know, everything that happened between 1937 and 1945 was an atrocity, its hard to apply in sort of logical scale to what went on during those years. It seems very probable that, had the war with Germany continued long enough, Dresden would have been the first A-bomb target, that's why it wasn't bombed until late in the war. I'm looking for sources on that, I picked it up from a friend that works in military think tank.
PS: Neither Chruchill nor Roosevelt wanted war with Japan. England had its hands full with Germany and and Roosevelt wanted to help. If Hitler had not delcared war on the us on Dec 11, 1941 England and Russia would have been fighting him alone. Had we known the Japanese were coming we would have ambushed them, that would have been a better outcome for both Roosevelt and Churchill. (source "Roosevelt's Secret War" Joseph E. Persico)