You need to also take into account the false positive too (1% iirc). Under your priors a group of 100,000 people will have 1000 infected and 99,000 not infected. Specifically:

99,0000.09 = 8,910 false positives 99,0000.91 = 90,090 true negatives 1,0000.99 = 990 true positive 1,0000.01 = 10 false negative

So going through your plan will isolate 8,910 + 990 = 9900 people (9.9% of the population), catching 990 actual cases and letting loose 10 cases.

In other words we can isolate 10% of the population and reduce the number of carriers by 990:10 ratio. This seems more effective than the current 100% isolation. All we need is the tests now.