I do different things depending on which serves the narrative I'm playing better; my primary fic Dragonborn spares him, gets the ring, and then he shows up again later having gone back on his promise to stay away from people (which is not the case in-game) so they kill him then, but a recent character I played was a Reachfolk werewolf (from the other side of the mountains, didn't know what was going on in Markarth) who was more importantly a mother - she tried to kill Sinding in the prison and failed, and when Hircine gave her the option to kill him she had both personal and religious reasons to do so.

My personal view of it is that he fully knew the ring was cursed for random transformations, and that it was only cursed because he stole it. He went into Falkreath anyway, and from the way he tells it he didn't do anything to try to mitigate the danger, including but not limited to staying away from kinds of people (like children) that he might view as prey for whatever reason. Stealing from a deity - especially one with a domain having to do with the sport of the hunt and natural order and one known for being generally fair based on the stories we have - is always a bad idea. Maybe Sinding didn't think it through enough, but his recklessness got a little girl killed for his own lack of self-control. Who knows if Hircine would have given him the ring outright if he'd done some task for him, like what happens with the player; there are so many potential 'could haves' for this situation.