The theory wasn't about remembering, it was mostly about babies supposedly having a nervous system too immature to interpret pain as in adults. This is not the current opinion at all anymore.
You are correct. But there is also the aspect that in current opinion, children below the age of 2 to 3 years do not form episodic memory. Which can reinforce the misconception about the necessity of anesthetics in children, because they are unable to recall and tell about the pain.
Anesthesia is mostly know-how. When you've put several hundred kids under, you (usually) become equipped with a good sense of what's going on, even without kids telling you.
