I wouldn't say sadistic but rather vengeful. The way many people on these boards talk about why it was better the way it happened because it was a fate even worse then death; they come off as more vengeful then anything else. And you're right, there are plenty of other ways to make sure Ozai would never hurt another innocent again other then death;
Banishment into the spirit world (maybe he could run into Koh)
A good blow to the spine, paralyzing him for life
Crushing his hands and feet
Bloodbending him right into a prison cell
Blinding him permanently and permanently removing some of his other senses
Some form of brain damage that would reduce him to a vegetable
Blocking his chi like Ty Lee . . . but in a way that blocks it permanently
Some form of binding his limbs at the flesh . . . something more permanent then glue . . . (sewing stiches?)
Toph encasing him in a metal suit, perhaps in an awkward position with his limbs facing towards his head . . . a rock suit could do the trick but could be more easily removed by a treacherous earth bender (ex. Dai Li)
And then there's the one that neither Aang, nor Nick would ever consider . . . a metal suit with blades/hooks on the inside so that if anybody tried to free Ozai from the suit, Ozai would quickly bleed to death.
I know about half the methods I came up with were a little horrific, but my point is . . . the methods of incapacitation other then death is limited only by the imagination. Maybe he could be put in some really clever anti-bending body cast that could only be removed by a combination of powerful air, water, earth and fire bending . . . so it's only removable by an Avatar. There's an ingenius device. I wonder if the Mechanist could whip one up . . .