Joseph,
“So you’re not in the slightest worried that providing a child with corporal discipline for playing with fire may result in negative feelings leading him to become an arsonist but you are worried that providing a child with corporal discipline for being mechallel Shabbos may result in negative feelings leading him to become a mechallel Shabbos?”
You’re like a carpenter with a toolbox that only has a hammer, so every problem looks like a nail to you. The purpose of the extreme reaction by the matches is to convey, palpably, how scared you are by the act. If a young child tries to touch a hot pot and the parent says in a singsong voice, “oh honey, let’s not touch that pot, it’s hot”, there is no sense of danger, and the child’s curiosity will push him to test the limit. But if the parent lets loose a primal scream, slaps the child’s hand away, and yells, “HOT! DON’T EVER TOUCH POTS ON THE STOVE!”, the child will associate a fearful experience with the stove. It’s then up to the parent to help the child process that experience, telling him how scary it was, and that he yelled not because he was angry, but because he was scared for the child.
Shabbos is very different. First of all, young children have no understanding of melachos or muktze, and they have to be gradually taught what to do. You wouldn’t punish a 2 year old for not knowing how to drive a car, right? Because it’s a gradual process, children already know from experience that they won’t be injured if they play with an electronic toy, draw a picture, or flip on a light. So trying to make it into a scary experience or spanking them is counterproductive. If you want to utilize a strong reaction to demonstrate the seriousness of chillul Shabbos for a child who is old enough to know, burst into tears.