I think the idea with the time limits, however inconvenient they may be, is to keep bikes in circulation. Also, the time limits aren't carved in stone, so they can adjust them in the future - shorter if bikes aren't being kept available, longer if too many people get hit with overtime fees and usage drops off. The key to success for this program is for anyone to have a bike available whenever they need it. I think a bigger problem is going to be the commute "surge" - it's possible that every bike within 10 blocks of Grand Central and Penn Station will be gone by 9:00, and that bikes returning there at 5:00 will find no empty docks to park in.
As for the NYPD, they must investigate every bike accident - how else could they confirm the car driver is never at fault!