When should a dog be removed from his home?

Okay.

So the week I got Oscar I met this small light tan colored, short haired mutt similar in size to Oscar. SUPER sweet dog, running loose in the apartment complex, complete with collar and name/phone number/address tag. I didn't have my phone so I picked him up and carried him to my apartment, got my phone and my spare leash, and called said number. Since it was dark outside and I got him inside to better light I realized he was VERY skinny. As in not healthy dog skinny. But due to his disposition and the tag I thought perhaps he was older or had a health problem. In addition I am not one to judge as the dog I recently got was also quite skinny. Still is, but he's looking better.

The lady acted like it was a non-event, and goes "yeah he does that some times" and seemed torn about what to do because she was "all alone with an infant who was sleeping and couldn't leave him." Again, not being one to judge (who calls their child "an infant"? I thought the general parental term was "my baby" or something less scientific) I offered to bring him over. Turns out it's somewhat far, however the dog probably took a shortcut through the neighborhoods and hopefully not along the main road. Which is busy and lacks sidewalks, or a lot of space off the road to walk on. And is right next to a major freeway.

So.

Brought the dog over to her HUGE house with castle like qualities and fancy twisted brick arches over the driveway which led to a MASSIVE garage. I pulled into the driveway in front of the white escalade, and she came out and picked him up and said thank you and he wagged and trotted up the sidewalk. She told me he was their "Ike find" (I didn't realize hurricanes were like garage sales, but perhaps I have much to learn) and went inside. P.S. A middle aged man (presumably her husband) was standing at the bay window watching... alone with your infant? really?

Today, about 11:15 after watching Letters from Iwo Jima I took Oscar out and between two parked cars saw a familiar tan dog. He came walking up to me and growled at Oscar a little then wagged his tail and followed me down two apartment buildings and up two flights of stairs, and walked right into my apartment. He's just as skinny (it's been about 3 weeks probably) and had diarrhea smeared in his fur. I offered him some food and water (refused both) and called. Again. This time she came to pick him up. He saw the car and wiggled and I let him off the leash and he ran up to the car happily and jumped inside

I had to bite my tongue to keep from saying mean things. I wanted to drill her on her ability to care for the dog and threaten her with all the bad things that could possibly happen to Teddy, and threaten to take him to the pound. And demand they neuter him. But I didn't.

Why? Well for one, he was clearly happy to see them. And maybe he is just a really amazing escape artist. There's no excuse for the lack of neutering but I didn't have anywhere to keep him overnight without risk of an all out dog brawl, or diarrhea smeared on my couches.

And there really is no way to guarantee a better alternative. I can take him to a pound/adoption place where they'll probably just send him home anyway, or hopefully find him a better home, but there's no guarantee. I sure as hell don't need another dog although he's quite awesome.

But the reality of it is, he's running loose to get hit by a car, spread disease and make unnecessary puppies. So next time... what would be the best course of action?