Should a reference letter for a student always be positive?
The general answer is yes, a reference letter should always be positive.  If one cannot write a positive letter for a student, one should decline to write a reference.

In this case, the student is having difficulty, perhaps even internal conflict, in choosing programs to which to apply.  Captain Emacs has it right in the comments; that's not relevant to his ability to complete a Ph.D. program.  If repeated requests to suggest programs are becoming tiring for you, say, "Repeated requests to suggest programs are becoming tiring for me.  You are an adult.  Find and select the program that you believe will suit you best.  I've already suggested those I believe will best suit you."

While you are having that discussion, set a limit, perhaps three to five, on the number of recommendation letters you will write.  Applications are usually kept to a reasonable number by the fact of application fees, but sometimes students get carried away anyway.