It may seem cruel, but I don't think they 'knew' Frodo wouldn't destroy the Ring. They likely figured he couldn't but they were hoping against hope that somehow it would find it's way into the Cracks of Doom. I've always interpreted this as a shot in the dark on their part. It seems pointless and cruel, but I don't think there was another choice.
That's the way I see it anyway.
H.C.
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"Stir not the bitterness in the cup that I mixed myself. Have I not tasted it now many nights upon my tongue, foreboding that worse yet lay in the dregs."
-Denethor
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