You cant compare Sterling in his development with Ronaldo and Fabregas when they moved as they were all A) younger and B) nowhere near as far along in their development. Being able to play with better players didnt realy help the other bright young things that moved to City or Chelsea in recent times did it? It pretty much stunted their development so much that they ended up moving to the likes of Sunderland etc.
If your going to compare him to someone I suppose it would be Hazard, but he was moving to a Chelsea who didnt really have anyone comparable already on the books (the same as those above). All the teams currently that would be able to offer him the kind of money he wants have someone better in his position(s).
Who says Sterling is further along in development, I think both Fabregas and Ronaldo were better in their first seasons with Arsenal/Utd than Sterling has reached with Liverpool.
Second, you can't go player A went to club B and failed thus every young player will. Sinclair, Rodwell were both drastically over rated, didn't produce anything like what Sterling has already and were most likely bought for different reasons.
There are good players with potential teams buy hoping to get into the first team and teams that are deemed maybe good enough to fill up some home grown slots. Sinclair never looked like anything but a squad filler and for me neither did Rodwell. Rodwell looked to have more potential but the main reason he went no where with City was he spent what 3 years basically constantly injured and unable to play, had he not been a sicknote during those years maybe he would have developed further.
How many players went to Liverpool thinking they'd be developed and become great first team players, just as many who went to other clubs. Is the fact that dozens of players who have potential went to Liverpool and failed a reason why no other players should ever go to LIverpool because the same MIGHT happen to them?
Everything is a risk but money is money and a contract is a contract. He could break a leg, do his ACL and not play for 4 years but be on 100k a week at LIverpool or 200k a week at City.
As for all the teams who are interested have better players in his position, I don't believe that either. City don't have really any quality wide players. Nasri, Silva when wide aren't good on the wings, don't have pace and don't beat players for the most part. Navas has pace but no final ball. City for me have no one even close to the quality of Sterling in his position. Chelsea, Hazard sure, same position other side, haven't seen any sign of Cuardrado being good and Willian isn't particularly good.
Anyway as said, the best players don't fear not being played, training, coaches and playing with better players and against better teams are just as useful to development as playing.
There is no right or wrong about what the best choice is, the only certainty in football is a contract and how much it's worth.