It always struck me that the problem with Bush's approach to faith-based initiatives was that he viewed their purpose as paying churches to proselytize, rather than viewing them as partners in government-led action. Obama's plan actually follows the more moderate path that Ohio's FBCI took after years of Taft's office funnelling money who knows where - looking at faith-based organizations (note: organizations, not just churches) as potential partners the same way you would other nonprofit organizations, rather than looking to simply pay churches for being churches.
The critical part is also the fact that agencies which accept federal funds must abide by federal hiring guidelines in the use of said funds - a necessary compromise unless the government wants to step into the process of hiring denominational clergy . The other benefit is that the lack of ability to discriminate using federal funds will likely push out many of the fundamentalist organizations that made the initial faith-based initiatives so problematic.
Ah, well, I know this probably isn't the most popular position. Fire away.