Personally, I like to be physical with my dogs. I hug them and rough house with them, and PLAY with them very physically. I am not a fan of physical punishment. Putting a dog into the commanded position, following through with a command, etc, could be considered a physical correction -- but not punishment.
Would I physically punish this dog? No way. What is the point? I would put the dog down. It isn't right. It isn't safe, and no amount of physical punishment will make that dog safe. It is possible that physical punishment contributed to this dog's demise, but that would only be conjecture, and certainly I think dogs can be this insane without having been treated with abusive punishment over time.
But of course, one would do whatever they could do to get the dog to release the child and to prevent the dog from getting at the child again. I do not know if punching would be very effective or the most effective, and might increase the dog's energy and persistence. What you would want is for the dog to release it's grip. Increasing the punching and hitting might make the dog bear down and shake. I don't know, and I would never want to be in such a situation.
But I think I would go for the dog's eyes rather than punching the dog. You have to have a LOT of force to shake a dog with a blow to the head. But it is possible with much less force by going for the eyes, or other vulnerable areas, you might be able to redirect such a dog onto a yourself, so that the child could be removed.
I don't blame the bystanders at all. I would probably be standing there in everyone's way with my mouth hanging open catching flies. I don't know because I have never been in the situation. I hope, I could be a hero and taking part in the rescue. But it is kind of sweet of us to criticize them while we sit on our warm, safe chairs typing on a computer, and picturing ourselves in our make-believe hero-roles.
As for confronting the guy walking away with the dog, well, I might follow him and see where he goes, but the guy has a vicious Rottweiler. Having the attack filmed, one would hope they could get a good description of the guy and figure out who he was by it. I would plaster his face all over the six o'clock news with the phone number of the local police. Someone would turn him in.
By the way, I think using an event like this to make fun of people for their training styles, and ideologies, is kind of crappy.