Umm, no. Keeping kids who clearly don't belong does not set the tone or culture. Winning does. Getting talent does. I totally understand that Hurley would prefer for these kids to go out on "their own terms", but in the end, he surely wants them out.
To take this outside of sports so we can all relate better.
Company A has a boss who fires employees who aren't top performers, even though they are competent at their job.
Company B has a boss who is honest with employees about their shortcomings, and works with them to help them improve so they can maybe become a top performer.
No one wants to work for Company A, the culture sucks becuase everyone is worried they could be the next one fired. Company B is much better because the boss shows they truly care about their employees - this motivates everyone to perform at a higher level.
Companies with good culture and high employee morale consistently outperform companies with poor culture and low employee morale.
Much like business, basketball is a team game. If the team is not bought into the culture, then no matter how talented they are they will almost always come-up short of expectations in the end. And the team / future recruits won't buy into the culture if the coach consistently says one thing and then does the other.