We can see: Alfred North Whitehead & Bertrand Russell, Principia Mathematica to #56, Cambridge UP (2nd ed, 1927), Introduction: Ch.II THE THEORY OF LOGICAL TYPES, page 39-40:
When we say that "ϕx" ambiguously denotes ϕa, ϕb, ϕc, etc., we mean
that "ϕx" means one of the objects ϕa, ϕb, ϕc, etc., though not a definite one, but an undetermined one. It follows that "ϕx" only has a well-defined meaning (well-defined, that is to say, except in so far as it is of its essence to be ambiguous) if the objects ϕa, ϕb, ϕc, etc., are well defined.
It is necessary practically to distinguish the function itself from an
undetermined value of the function.[...] If the undetermined value is written
"ϕy," we will write the function itself "ϕŷ."
We have seen that, in accordance with the vicious-circle principle, the
values of a function cannot contain terms only definable in terms of the
function. Now given a function ϕŷ, the values for the function [we shall speak of "values for ϕŷ" and of "values of ϕy," meaning in each
case the same thing, namely ϕa, ϕb, ϕc, etc.] are all propositions
of the form ϕy. It follows that there must be no propositions, of the form ϕy, in which y has a value which involves ϕŷ. [...] Hence there must be no such thing as the value for ϕŷ with the argument ϕŷ, or with any argument which involves ϕŷ.
We have to be careful with the similar (but different) symbols:
Socartes is a man
is a proposition.
The (propositional) funcion is: ŷ is a man.
The expression y is a man stay for a "generic" value of the function ŷ is a man, i.e. for: Socartes is a man, Plato is a man, etc.
The vicious circle principle forbid to form a proposition of the form y is a man with some value of y that involves ŷ is a man. A fortiori, we cannot use ŷ is a man itself as value for y, i.e. we cannot write:
(ŷ is a man) is a man.
What about y is a man ? It is a "generic" name for the (meaningful) expressions: Socartes is a man, etc.
So the question amounts to: why (Socartes is a man) is a man is forbidden by the vicious circle principle ?
It is not; it is forbidden by the (not so clearly stated) syntax rules.
ŷ is a man is a first-order functions [see page 51], i.e. a function that involves no variables except individuals.
Thus, the possible value for its argument must be (names of) individuals [the type of the argument of the function must be the "lowest" one], like Socrates, Plato, etc. and not (names of) propositions, like: Socrates is bald.
In conclusion, with an "abuse of terminology" with respect to PM, we have that (Socartes is a man) is a man is ill-formed with respect to the (not clearly stated) PM syntax rules, irrespective of the vicious circle principle.
Compare with Mathematical logic as base on the theory of types (1908):
every propositional function has a certain range of significance, within which lie the arguments for which the function has values. Whitin this range of arguments, the function is true or false.; outside this range it is nonsense.