Does this approach ever work?

Maybe. I think this approach might work better for students applying for summer jobs mowing lawns, working in snack bars, movie theatres, etc... than people seeking professional long-term careers.

Can these job applicants be swayed into a more effective behavior, such as tailoring the job application, or should they really be declined on the spot?

Normally, I'd say "Why do you care?" because you're not their mother and it's not your job to help them get a job and generic resumes will work against them. BUT... I'm guessing you asked this question because some of the generic resumes you read piqued your interest enough that you want to give them a second chance to write a better resume. If they're good enough to warrant some interest, why not invite them in for an interview? It sounds like they got your attention despite having a generic, mass-mailed resume, so it might be worth following up on.

Does this approach ever work?

Maybe. I think this approach might work better for students applying for summer jobs mowing lawns, working in snack bars, movie theatres, etc... than people seeking professional long-term careers.

Can these job applicants be swayed into a more effective behavior, such as tailoring the job application, or should they really be declined on the spot?

Normally, I'd say "Why do you care?" because you're not their mother and it's not your job to help them get a job and generic resumes will work against them. BUT... I'm guessing you asked this question because some of the generic resumes you read piqued your interest enough that you want to give them a second chance to write a better resume. If they're good enough to warrant some interest, why not invite them in for an interview? It sounds like they got your attention despite having a generic, mass-mailed resume, so it might be worth following up on.