1 смиловался, привязал собаку к осине, а сам отправился домой. What the text calls pity or mercy might more accurately be described as squeamishness. It is common in fairy tales where one character is supposed to kill another (for example, where the huntsman is supposed to kill Snow White in the forest) for the former to find himself or herself unable to complete the task, whereupon he or she decides simply to abandon the victim in the forest instead. Abandoning a helpless child or animal to starve to death or be killed by wild animals in the forest is hardly consistent with real pity or mercy, but in fairy-tale logic the main character never dies from this type of abandonment.
2 Ну, уж теперь я буду знать, что делать! As is typical of fairy tale characters, the wolf in fact learns nothing from his mistakes, and is outsmarted by all of the would-be prey he encounters. Meanwhile, the tale does not concern itself with the inconsistency that he had no trouble rounding up food for the dog in the first half of the story, but is then unable to succeed at catching and eating anything for himself.