PD I think the thing you're neglecting is Nagato's personality. Nagato seems to have had a very weak, timid personality and before now was only able to bring out his real power when he was really emotional and/or his life was in danger, not unlike someone else we know.
And why he didn't do anything before is pretty simple. Shock. They weren't expecting Konan to be taken hostage and after seeing this I'm pretty sure he and Yahiko could have fought their way out but Yahiko elected to kill himself, by impaling himself on Nagato's kunai.