Extreme? I read it when I was 6 or 7, and was amused by it. I have a number of books that are inappropriate for children, but Struwwelpeter isn't one of them.
I also read it at age 6 or so.
Many American parents would find it inappropriate for kids given how graphic and negative it is. I think it is a classic however.
The burnt alive story was not about punishment. It was about what could happen if you play with matches. Fire doesn't care how old you are.
As for the tailor, even I at 6 or 7 knew that wasn't going to happen. I didn't know any kids who were missing thumbs!