I'd like to feel like people would be ethically and morally motivated to make efforts to do the right thing rather than expect to be rewarded for doing the right thing. Perhaps it is how I was raised, but it seems weird to me that I would turn in a lost wallet with expectation to get something back out of it. This so-called "custom" is not my custom. It actually seems very childish, where one is still in the phase of learning the importance of taking care of their neighbor.

Hassle free return, drop it in a mailbox. Leaving it is an option, but the custom of returning things to their owner exists because one good deed begets another.

Don't feel too bad. Could have been a thief at first that just left it on the sidewalk.

I would not. It's an insult.