One clear issue is the separation of church and state issue, and on this the ground is pretty well prepared. The "initiative" for delivery of social services is a federal, secular one and this is different from the "faith-based initiatives" of the Bush administration where the religious organization proposed to do social services work based on their own existing and or planned work within communities. The distinction may turn out in practice to be specious, but in the initial stages, it is important to understand that community groups (including community religous groups) doing the work of government—secular social services—is different from community groups and government doing religious groups' work.
The safeguards against overt proselytization are sturdy enough, I think. I have experience as a reviewer of the Bush-era F-BI grants for my state university campus and saw these overt safeguards and the strict rules behind them. I have to say, however, that Bush's and Obama's use of religious organization infrastructure and manpower brings with it a not-too-covert message that is positive for religious organizations and provides opportunities aplenty for unauditable infractions of the separation of church and state.
But there is another not so obvious reason for Obama to embrace this sort of project. It goes directly to his experience in street-level politics and community development. It is the essence of his understanding of street-level America that is now in play, and if Rev. Wright did not get your attention to this part of Obama, then you were sound asleep. Barack Obama knows how to work the religious group for civilized ends, even political ends. So, where there are opportunties for unauditable breaches of the separation of church and state, there are also opportunities for unauditable breaches of the separation of church and politics. If what is good for the gander were not good for the goose, then many would say, go ahead and convert these people to Democratic values. The trouble is that Republican values should have the same opportunities, so back we go to square one. It will be much better to just let the light of Democratic values shine beside the glow the religious elements inevitably brings to the show.
An even more interesting and less obvious issue in the Obama plan is the manpower discipline issue. When Reagan inherited the remains of the Great Society his minions did what they could to make sure the system did not work. In many respects Reagan's "welfare queen" was a product of his deliberate maladministration of the program. This is to say that workers at the interface level were so poorly supported by management and that management was so dead-set against welfare that the system inevitably crumbled and became counter-productive.
Now, though, with the manpower issue distributed outside civil service, with authority for program management in place for other reasons, reasons that require discipline and do not promote malfeasance, and with interface people at street level bringing in their own moral code, the operation should work far better than the Reaganite saboteurs system and even better than the bureaucratic machine establish back in Johnson's era. And, if this is so, the federal government can hope to replicate these benefit facets of the system for other social services delivery systems, too.
There are hazards, but the hazards of doing nothing or opening the system to obstructionism and sabotage is far more perilous, I think. Obama must hire men and women of unquestionable integrity to run such programs.