If Daemon Blackfyre sat on the Iron Throne, would Westeros be a constant state of war because of the removal of the Great Houses? What steps would House Blackfyre need to take to help pacify or end these local conflicts brewing through out the land?

Maybe, maybe not. Keep in mind, my theory is that Daemon was planning to replace the Great Houses with his supporters, so you’d still have the institution there, just different occupants of the offices:

“the Reynes as the Lords Paramount of the West, the Yronwoods as the Lords Paramount of Dorne, either the Freys or the Lothstons as the Lords Paramount of the Riverlands, possibly the Hightowers or Oakhearts or Peakes as Lords Paramount of the Reach.”

Whether that would have led to more local conflicts than Daeron’s punishments of the Blackfyre supporters, I think it’s hard to say.