But the dangerous ones can't just be let loose to roam the streets attacking and murdering random members of the public.
Certainly, a person like that should be under surveillance, but it appears the surveillance failed.

A surveillance team cannot act until a law has been broken.Walking along a street with evil intent is not a crime. It was seemingly a random action with no prior information to suggect it was going to occur.
Lonewolf terrorist actions are almost impossible to predict or prevent Even those seemingly deradicalised commit terrorist acts.

Should they ever be released or should they be pernmanently wearing tags? Religion causes a lot of grief.
Christianity has moved with the times, aspects of fundementalist Islam seems stuck in the time of the Crusades. How do you change that?