The report does record the Prophet Muhammad (PBUH) correcting Aisha's confident declaration about a particular dead child. But it does not say that the child was destined for Hell, nor does it teach that innocent children are damned arbitrarily. It teaches caution about declaring the unseen while affirming that Allah's judgment is perfectly just.
What the report actually says
The objection is strongest when stated plainly: Aisha described a deceased child from the Ansar as "a bird among the birds of Paradise," and the Prophet (PBUH) replied that she should not speak in that way, mentioning that Allah created Paradise and its inhabitants, and Hell and its inhabitants. On a quick reading, this can sound like a refusal to affirm the child's salvation, based on a fixed destiny.
"O Aisha, do you not know that Allah created Paradise and created its inhabitants, and created Hell and created its inhabitants?"
Sahih Muslim 2662c
That is a fair concern about the wording. The Prophet (PBUH) did not simply say, "Yes, he is certainly in Paradise." Muslims should not soften the report into something it does not say.
Why this is not a declaration that the child was damned
The reply is a warning against assigning a particular person to Paradise without revelation, not an announcement that this child belongs to Hell. The hadith does not say, "This child is one of the people of Hell." It states a general truth about divine creation and foreknowledge. Allah knows the final destiny of every person, but human beings do not ordinarily know the unseen fate of a particular individual.
Other texts establish the governing principles: children are not morally accountable before maturity, and Allah does not punish without establishing responsibility and proof.
"No soul bears the burden of another, and We never punish until We have sent a messenger."
Quran 17:15
Classical scholars therefore did not understand this narration as teaching that Muslim children are arbitrarily sent to Hell. Many held that the children of believers are in Paradise, while others said that the final judgment of children is known only to Allah. Both positions reject the claim that a blameless child is punished for a sin he did not commit.
Predestination does not mean injustice
The phrase "Allah created Paradise and its people" concerns Allah's eternal knowledge and decree; it does not mean that people are forced into sin and then punished for what they could not avoid. The Quran repeatedly denies that Allah wrongs anyone:
"Indeed, Allah does not wrong even the weight of an atom."
Quran 4:40
Divine decree is not a fiat that makes injustice just. Rather, Allah's knowledge encompasses the whole reality, while His judgment remains based on perfect wisdom and justice. A child who has no accountable moral record cannot be treated like a deliberate rebel.
So the hadith establishes that Aisha's certainty about a specific unseen outcome was corrected. It does not establish that the child was condemned, that children are punished for others' sins, or that Allah damns the innocent capriciously. Its point is epistemic humility, not the denial of divine justice.