I am glad she did wipe out the city, as I like the idea she completes the Mad King's plans - it's how we get there. There are two ways they could have alleviated the jarring nature for me.
Make it about more than her finding out about Jon Snow and his rejection of her - you could argue it was also about her advisors all trying to throw their lot in behind Snow, but she doesnt turn on Jon, so how much can we hold that as a deciding factor in her rampaging? She seems content that she is going to go on unchallenged after the burning without the need to take Jon out of the picture.
More so than that, it was the fact that Dany burns the City AFTER it has surrendered - have the battle turn against her - give Cersei some cunning plan ("Aieeee! Elephants!"

) so that the only weapon to turn the day was Drogon demoralising the forces through sheer terror.
It's telling that this is not spoken of when Jon confronts her - "Cersei was using the children" says Dany - how the fuck was she using the children? She had won. Now, if we are to say it was because she knew Jon Snow would have more legitimacy/ support, then she would have to turn on Jon before anyone.
I can see the psychological approach to Grey Worm, Steve, I just dont like what it does for the character or dramatically for the fizzle out "non-threat" of Jon and Tyrion being prisoners. If they ahd let the Unsullied sail out with Jon Snow's head on a spike, Ned style, that might have worked....
They should have called this episode "How Tyrion Fixed Things (despite being a prisoner the whole time)"
It doesn’t seem like a leap to me that she would look down on that city, on those people, knowing that everything she’d sacrificed meant nothing to them but that fear drove them in the end, and that she might think: I’ll show you fear.
We'll have to agree to disagree - personally I think they easily could have shown Dany going 'too far' without having her systematically wipe out the entire civilian population of the city. It seemed so over the top to me that her justification this episode (that it was about 'freeing people') was totally nonsensical, as was Jon's 'dilemna'. That they seriously try to suggest that Jon is in any way torn about his allegiance to her given what she just did is laughable, and that robs this episode of tension or surprise.
#notBeenPayingAttention
Worth pointing out that this line of dialogue (spoken by Ramsey Bolton, IIRC) only appears in the TV show, and to me is emblematic of the fundamental difference in philosophy and worldview between the show and books. To me the books are all about people struggling to do the right thing in a harsh world, whereas the TV show has much more of a nihilistic 'dog eat dog' mentality, and has long conflated honour with stupidity, something the books resolutely do not do.
I'm still very much convinced that the ending to the books will be far more hopeful and far less bleak.