They can't hire street captains per their CBA and that is why they are doing the whole CQFO thing.

2) Will the announcement that TSA is hiring street captains hurt their efforts to find first officers,.....who are chasing the quick upgrade, ("catch 22")?
Doubtful because if you don't already have the mins it will take you more than a year to get them anyways so their hope is that attrition will allow them to continue to get a quick upgrade once they hit the mins. My guess is that you won't end up with too many lifers with the type of personality that would take the jump from one regional to another.

3) If an 8 year Envoy First Officer takes a street captain position at TSA,.... how much will the pay cut be?

There wouldn't be an hourly paycut for an Envoy FO with a CQFO position as the top out at Envoy ($42) is less than TSA's blended rate ($43.41). The only tough part would be during training where you are paid new hire pay ($24.92) at 60 hours a month until completion of OE with no per diem. Also, no insurance for 30 days.