Why didn't Sarutobi kill Danzo?
Danzo was, in his own way, protecting the Hidden Leaf.

Danzo would normally do the "dirty work" and handle with that "black ops" of the Hidden Leaf, thus keeping the village officials clean.

They had their disagreements, and yes Danzo did act in order to dispose of the Third and have control over the Hidden Leaf, but Hiruzen always believed that all he's doing was for the best of the village, so he let it slide.