I'll allow people of Islam to explain your context-devoid excerpt:
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"If you read verse 8:30 and on you notice the disbelievers plotted to imprison or kill the Prophet or drive him out of his home land. They were causing corruption and oppression, where people can not practice their faith. They were striving hard with their wealth to take men off the path of righteousness the path of Allah. 8:38. Allah will forgive them their pasts if they stop oppressing the people and leave them to practice their faith.
But the believers were told to fight the oppression and unjustness until the system/ways/religion was the ways Allah has prescribed. And from the Quran we understand there is no compulsion in religion (2:256). For you is your religion, and for me is my religion (109:6) . Those are part of the religion of Allah. However the disbelievers are not allowing this plus the corruption and forcing people out of the land and trying to kill the Prophet, thus the fighting.
Allah has no need for people to believe. However His mercy might extend to His servants by giving them security and owners of the land. His servants are the ones who deal justly and give people the opportunity to choose to believe in God or not. However at the same stroke His servants are not people to accept oppression and are asked to stand up. The end result could lead to victory. At times losses by way of trial." - Hamzeh
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"You asked:
"the verse very clearly says "until ALL religion is for Allah." Does this mean freedom of religion"
To the best of my understanding it simply means 'until man is free to worship God.' A similar phrase is used in 2:193, as well. Therefore, once both verses have been exaimen it becomes obviouse that "until ALL religion is for Allah" simply means until God can be worshipped without fear of persecution, and none is compelled to bow down in awe before another human being. (See also 22:40.) The term 'din' is in this context more suitably translated as "worship" inasmuch as it comprises here both the doctrinal and the moral aspects of religion: that is to say, man's faith as well as the obligations arising from that faith.
You also asked:
"does He want us to live peacefully with everyone?"
I would argue He wants us to live peacefully with others, as eviden from the following verse (which is just one of many verses that advocate a similar lifestyle):
“Allah does not forbid you to deal justly and kindly with those who fought not against you on account of religion and did not drive you out of your homes. Verily, Allah loves those who deal with equity”
[al-Mumtahanah 60:8]." Hassan A
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And another four verses that assist in the clarification that this means in self-defense of those who mean to commit violence and/or malice on you:
"Fight in God's cause against those who fight you, but do not overstep the limits: God does not love those who overstep the limits. Kill them wherever you encounter them, and drive them out from where they drove you out, for persecution is more serious than killing. Do not fight them at the Sacred Mosque unless they fight you there. If they do fight you, kill them—this is what such disbelievers deserve—but if they stop, then God is most forgiving and merciful. Fight them until there is no more persecution, and worship is devoted to God. If they cease hostilities, there can be no [further] hostility, except towards aggressors. A sacred month for a sacred month: violation of sanctity [calls for] fair retribution. So if anyone commits aggression against you, attack him as he attacked you, but be mindful of God, and know that He is with those who are mindful of Him." -Qur'an 2:190-194
Final thoughts as a non-Muslim; One is free to interpret things how they choose... However, in relation to the entire body of the Qur'an it is clear that violence is reserved as the final option one is left with as a response for people who another nation is waging war against.