PeteG,
The villagers should get in touch with the local council, and the local branch of CAMRA (Campaign for Real Ale) http://www.camra.org.uk/ and click on "CAMRA near you". To convert a pub to houses you need to get a change of use policy approved by the council. You have to be able to prove that the pub is unviable as a business, and deliberately running a pubs business down doesn't count. CAMRA have been very successful in opposing such changes of use in the past.
Hope this helps.
TE.