At the risk of stating the obvious, when you search extensively online and find nothing, then the first thing to look into is - are the relevant records available online, and if so, where? If they are online, then the next thing to look into is whether the dates in question have survived.
Since Richard senior had the same settlement in both 1827 and 1829, there is a reasonable chance that he was actually resident in Sherborne at the time. Did he have other children baptised in Sherborne (or nearby)? The record gives his wife's age, so have you identified a marriage record or licence which might offer clues? What about wills? Collins is, unfortunately, quite a common surname, but nevertheless the archives catalogue or TNA Discovery might possibly offer up clues .
But to answer your original question, all documents have the potential to contain errors, but since births at the Lying-in Hospital required a recommendation, then it's likely that Richard Collins supplied the correct information about his settlement.