No, he has done great things with many young players. Tatar for example made huge improvements to his two-way game and overall offensive game (being less of a puckhog for example) under Babcock. I think people miss these things because they get hung up on the few guys that have struggled (Jurco, Smith) or think that Babcock is responsible for all roster decisions.
Babs had no trouble giving Nyquist opportunities with Zetterberg, he played Jurco with Datsyuk many times, he was going to put Mantha with Datsyuk last camp.. he would have given Larkin pretty much the same chances he's been getting and definitely would have pushed for him to make the NHL roster.