I would agree that there were probably few adult innocents in the entirety of Kings Landing, but all the kids present were likely not even born when Ned was executed and shouldn't have been lumped in with them by Dany's judgment. Tyrion was right. If you go full-Aerys (and you never go full-Aerys), then you will have lost the war psychologically even if you might have won it tactically/strategically. The city should have stayed intact. The gods flipped their coin for yet another Targaryen (albeit maybe a little late in the game) and bad choices brought her fall.