The Michtav M’eliyahu contrasting today’s yeshiva and Torah with Derech Eretz is well-known.
Here is Rabbi Sternbuch’s comment to Rabbi Daniel Eidensohn:
[Rav Sternbuch told me to append a note to this letter of Rav Dessler’s letter. He said that the halacha is clear that it is not allowed to produce gedolim if it causes others to stop being observant. He said that Rav Dessler doesn’t mean that it is certain that people will go off the derech because of this approach – but only that it can happen. In addition that going off the derech here refers to a possiblity of losing the yeshiva standard of observance – not giving up religious observance entirely.]
Note: The reference to Michtav M’eliyahu (03 page 356) seems wrong.