Why are Native American names translated?

The answer to the question about modern practice is 'convention'. In general awareness Native American names have the form of 'Epithet Object/Animal' such as 'Red Cloud' or 'Crazy Horse'. Therefore you will see activities like children picking 'Native American Names' in this format. This is puzzling (or possibly even traumatising) to actual Native American children who're just as likely to be called George or Bill as anything else.

Many would claim (with some justification) that this convention has the result of creating the exotic other and minimizes the achievements of Native Americans as well as the malign impact of the intruders who are now the 'natives' of the land.

What are the origins of this convention? This would need a detail study of the sources but I suspect that it goes back to the Sioux Wars because all the most famous Native Americans known by their 'translated' names are Lakota (Sitting Bull, Crazy Horse, Red Cloud). They were made further famous by cultural efforts such as Buffalo Bill Wild West show. All the prominent natives of earlier eras are known by names approximating the sounds of the original language (Squanto, Pocahontas, Hiawatha, Geronimo, Tecumseh, Seattle, etc.) But it's possible that the tradition goes further back (and I'm sure the various ins and outs are far more complex).

Why the names of people like Sitting Bull were translated rather than used in their original form is not clear to me (I couldn't find any research). But one reason could be their particularly expressive nature when compared to other native naming conventions. It could also be that their bearers chose to translate them when communicating with English speakers.

Cross-cultural and cross-linguistic naming is a very complex and thorny issue (not least because different people ascribe different levels of importance to names). For example, many people choose to anglicise their names (Istvan to Stephen or Friedrich to Fred) others do not (Ivan vs John). Even within English you have identical sources for different names (Ian, John, etc.).