"Except that just isn't even remotely anything like true. Every adult is presumed competent until a court has declared the converse and merely mental illness is not by itself sufficient to provide this."
Who's disputing this? If we start with the person already being hospitalized, which seemed to be true in your comment ("were interred there") my comment stands. If by "interred there" you mean self admitted, well, OK... sure they could check themselves out... but that's not the scenario that the article raises. The meaning of "interred" as I understood it, and a brief review of the article seems to agree with my understanding, we're talking about an involuntary commitment. If that's the case, we can presume a legal process was performed to get the person in question in the hospital in the first place: establishing legal mental incompetence. Therefore, a legal process regarding release should, if its to be consistent, operate on the premise that, "one (unable to integrate) is the major fact that disproves the other (competent enough for self-determination)".
"Merely being a loser who wants to live in a tent and do meth doesn't make one legally incompetent and in fact any attempt to patch that bug with law alone will probably run into constitutional challenges"
And the initial premise has been challenged, kind of... the 9th circuit stopped Boise, ID from breaking up a homeless encampment on the grounds of cruel and unusual punishment. But Boise didn't actually provide for an alternative to the encampment: it fined and sentenced them to a a day or two in jail (most of them were sentenced time served)... the response was entirely punitive. Note that the right to camp/do wherever you want, uninvited, on public or other's property wasn't the right being protected: there is no constitutional right to that. It was that arbitrary punishments were being dolled out.
Having said that, there are already laws already instituting involuntary treatment and hospitalization, so the constitutional challenges may not be so clear cut as you might think:
https://en.wikipedia.org/wiki/Baker_Act
https://en.wikipedia.org/wiki/Lanterman%E2%80%93Petris%E2%80...