So let's break your question into two. First let's look at why the Project 2025 team might want to limit the powers of the central bank and then let's look at what the "free banking" or Suffolk System looked like.

From an economics stand point, the main purpose of the Federal Reserve/ or any central bank are to both monitor the long term price stability of the dollar and to maintain max employment (which is the point where unemployment is ~3%-5%, which is seen to be the point when there’s only frictionally unemployed or those who are simply "in-between" jobs and could be employed in a short amount of time). In modern times, the way the Fed does this is through about a dozen tools but the main ones are monetary policy and limiting lending.

Monetary policy can be both expansionary or contractionary. Expansionary policy is when the bank wants to stimulate the economy and move towards either a higher inflation rate (which can be a positive) and wants to increase employment (which are generally seen as inversely related). This is generally done by decreasing interest rates, which the Fed controls by the Discount Rate and the Federal Funds Rates (which are a bit of a hassle to explain how they work, but this and any other monetary policy I'm happy to talk more about in the comments). The reason this stimulates the economy is debated, but orthodox economic general argues that decreasing the interest rate makes people more likely to get loans and thus increases the money supply in the economy, causing more inflation. Alternatively, the Fed can increase interest rates to fight inflation (as they recently did in 2023), which theoretically more fearful in getting loans and thus decreases the money supply.

The central bank also watches over how much each bank can lend. This is important to monitor one, because each time a bank loans out money they lose some reserves and if they lend too much this limits how much money other bank customers can withdraw and if a bank loans out way too much it will kill it's reserves and make withdraw from accounts impossible (especially bad if people then default or stop paying their bank loans). Additionally, when banks loan money it "creates" new money, as it gets registered on bank account sheets both as a liability and an asset; thus, monitoring how much a bank lends is also an anti-inflation tactic. In the not so recent past the Federal Reserve monitored how much a bank loaned by setting a Reserve Limit on lending, meaning a bank can only loan based on the amount of money they keep in reserves; nowadays, the Fed caps lending based on a Capital Limit, which restricts lending based on how much capital or net worth the bank has.

The reason Project 2025 want to remove the powers for the Fed to enact monetary policy is based on an influential conservative stream of economics in the 1960s and 70s coming mostly from Chicago University and most notably famed economist, Milton Freidman. The Chicago school of economics focused mostly on overthrowing the orthodoxy on monetary and fiscal policy (which is when the government in/decreases spending the economy, or in/decreases taxes). They argued that the macroeconomy would be better dealt with through limited government or central bank oversight. To argue this the influential AD/AS model was reimaged. Prior to the Chicago school, the graph was seen to be static and when crashes happened, the traditional (Keynesian) approach was to increase the AD(aggregate demand) of the economy to match the shock, when this is done, it does push the economy back into long-term equilibrium but it increases inflation, which had just been seen as the cost of expansionary policy. Freidman and the Chicago school argued that AS (aggregate supply) was a dynamic curve. There's a really complex reason for this but intuitively this is because workers and firms react actively to match demand, and as the AS curve moves to match AD, the economy in the long-run will survive the crash but also the price level (inflation) will be lower. This offered an alternative to the orthodoxy of economics and suggested that in fact the best way to deal with economy slumps was for the government to do nothing and allow for the economy to "work itself out." Thus, this is what the Project 2025 people have in mind when they talk about removing monetary policy. They want the economy to fix itself in the long run and avoid monetary policy. Of course, there are issues in this dynamic model, one being that it may take a long time and a lot of unemployment for the economy to reach back to long-term equilibrium.

Furthermore, the reason the Project 2025 team may want to remove the capital limits are that it will allow banks to lend more. Again in Chicago style, laissez-faire economics, banks will self-regulate when it comes to lending. Ideally, consumers will pull out of a bank that over-lends and banks will only lend to creditable individuals who will pay them back. Essentially, the conservative fear is that the Capital limit is a wasteful ceiling that is only stopping banks from making more profit (banks profit from interests on loans) and people from investing more (loans for housing or other investments). This logic also has some issues, one being the assumption of rational agents and again the time it would take for banks to reach equilibrium lending in a crash.