Why would they give him a hook for a hand if they intended to kill him anyways?
Because they were just torturing him for the hell of it.
They probably didn't give him one. The urban legend itself did. It's a story of a one-handed killer. Of course he must have a hook in the other hand.
The flashback leads us more to believe it was an in-the-moment torture. To chop off a hand and then stick a metal object up into the flesh would have been highly painful. It's just no one at the time wondered "what if he comes back as a homicidal ghost with that hook".
Why would the Candyman stage his mutilations in such a way that it seems that someone else did it? I mean his ability to exist hinges on people believing he is real, so why doesn't he just make a grand demonstration? Kill someone when they are in the open? I mean it's clear he is patient and doesn't need to kill the instant he is summoned.
Because if his existence is confirmed, people might become a lot less cavalier about summoning him.