No, limiting their use of money and acting like a parent is a horrible, horrible idea. Housing first. Provide everything needed to care for themselves. Hire social workers to help, not restrictive laws and bureaucratic paternalism. Sure, some will continue the cycle regardless of how much help you give, but that is not a reason to stop trying. The majority who are able to escape the cycle is well worth the investment.
"but there needs to be a larger program in place that has various well-defined paths to becoming a functioning member of society for those that are serious about it. The rest we need to give Bus tickets to Dallas."
I think Tulsabug was being a little humorous there, but he (and you) are moving in the same direction. There has to be both carrot and stick in any solution of this type. I definitely agree with "housing first". Leverage a work-fare or similar program where the first need addressed is a safe place to reside, at a minimum simply for overnight stays. That will be a good start to a good process that can help a lot of people. But as you note, there will be those who, either by choice or due to mental health or chemical dependency or other factors, will not leverage this opportunity. Simply accepting that scenario is not an option, either. The end goal is to get everyone off the street. Provide the carrots, but we will need to utilize "sticks" as well in order to fully address the situation.