Effect on the Force
There are some hints that local concentration of life forms is important for the Force. When Luke approaches Dagobah in Episode V, he comments on the "massive life readings". Yoda has chosen to be on a world with a huge concentration of life, which might help amplify his (and Luke's) Force powers. Presumably, the life forms on Dagobah are less helpful to a Force user halfway across the galaxy.
That said, life and death do have non-local effects on the Force. When Alderaan is destroyed, Obi-Wan is shaken by the disturbance in the Force, even though he is far away in hyperspace at the time.
On the other hand, we know there are thousands of inhabited planets in the Star Wars universe -- eg. from the opening crawl to Episode II, in which "several thousand" star systems join the separatists. Even if a few are destroyed, the overall effect on the power of Force users may be negligible.
Characteristics of the Death Star
The Death Star is meant as a deterrent to rebellion. As Tarkin says: "Fear will keep the systems in line. Fear of this battle station." He deliberately destroys the peaceful, heavily populated planet of Alderaan as an example of the Empire's power and ruthlessness. So long as the Death Star is out there, it is intended serve a similar function to nuclear weapons in our own world -- it will seldom (if ever) be used again, because everyone knows how destructive the consequences would be.
In comments, it is asked what would happen if the planet-destroying technology proliferates. Episode IV plays up the huge size of the Death Star, and Episode VI emphasizes the difficulty of constructing it. It is implied that it represents a huge investment of resources, even for the Galactic Empire. Constructing multiple Death Stars would be extremely difficult, at best.
The Emperor's Personality
As Luke tells the Emperor, "your overconfidence is your weakness." Even if all of the above concerns are valid, the Emperor might have decided to build the Death Star anyway, trusting in his own wisdom, ruthlessness, and strength in the Force to keep himself in power.