Between the refugees acting like they just escaped the war a few days ago, and the bandits out in the middle of nowhere already knowing about a bounty on the MC's head, I'm firmly convinced that the mangaka either has no sense of time, or just doesn't care.
As for the "heroes" killing the kids, that part's actually believable. Most people will go along with the crowd, or at least the loudest voices driving the crowd. It's just easier that way; thinking for yourself is hard. This way they can justify to themselves that they were just following orders, or that they didn't have a choice in the matter. Also, don't forget that to varying degrees this is the OP isekai fantasy that most of them have been dreaming about. The chance to attack something nonhuman with their new powers, and do so with little risk nor effort, is something that most of them would jump at.
Now, saying that the dragon-girl isn't a demon because she has horns, that's just dumb..