Avram, regarding your long post…
The purpose of the extreme reaction by the matches is to convey, palpably, how scared you are by the act.
You should be at least as scared of his Mechallel Shabbos R”L as you are scared by that act of his.
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.
The same can be said regarding a child being mechallel Shabbos.
A child should be as fearful of Mechallel Shabbos as he is fearful of playing with matches.
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.
Same with mechallel Shabbos.
You wouldn’t punish a 2 year old for not knowing how to drive a car, right?
We’re discussing older children, not two year olds.
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.
Why don’t you suggest limiting the parental response to playing with fire or playing on the road to that as well?