Not only overblown, but perpetuated by the nature of the internet an the HF boards.
Yeah, it's urban legend, or mythology as the OP would like you to believe. But I still haven't seen a shred of evidence that busts this so called 'myth'.
Like I said in 2000-2005 the average NHL team produced 7 full time NHL players per 50 selections in rounds 2 thru 9.
The Red Wings produced 11. (10 of the 11 developed for 4-7 years after being drafted and establishing a full time role in the NHL) The 11th was Johan Franzen who was drafted as a 24 year old and came over as a 26 year old rookie.
The Average NHL team turns 2 out of every 3 1st round picks into full time NHL players.
The Red Wings only had 2 selections in the first round (both in the second half of the first round where those success rates drop even further) and both of them (Kindl and Kronwall developed into NHL players. Both players were brought along slow (4 or 5 seasons before being asked to contribute in the NHL full time).
BTW The 4 Islanders players that became full time NHL players from the 2000-2005 NHL drafts (rounds 2-9) Nielsen, Comeau, Campoli, Gervais...... None were asked to contribute full time in the NHL until age 22. Some were overage drafts, but all maxed out their junior eligibility and saw plenty of time in Bridgeport before getting a full time shot on Long Island.
So out of the 17 players that managed to play in at least 150 NHL games from the Red Wings and Islanders drafts in 2000-2005 from picks #19 overall to #298.... Every single one of them was brought along slowly and played multiple professional seasons in Europe, maxed out Juniors eligibility and played at least a full season (in most cases multiple seasons) in the AHL before making it to the NHL. Personally I find that interesting, and exactly the opposite of the intended purpose of the original post.
Now, that being said. There is the old saying in statistics and science, that correlation does not imply (or equal) causation. Meaning that just because there is a correlation between two variables (full time NHL Players produced, Method by which they were developed) does not prove that one caused the other.
But before someone just dismisses this theory as fallacy or myth or Urban legend, they are going to have to do a much better job at proving their case..... For starters, give me a team in those years that produced more NHL Players (150 or more games) on a percentage basis from rounds 2-9 and DID NOT have a majority of those players develop until at least the age of 22 before having them play in the NHL. Until then we are just ignoring the facts and creating the reality we want to be true (delusional).