Flooding CAN be an effective training tool but it must be done properly and by a well seasoned trainer. If you flood a dog that has a deep fear of certain things due to prior trauma, chances are you'll traumative the dog more. However, if your dog is scared of loud music, let's say, and you slowly flood the dog with loud music, s/he can learn to immunize itself from the music. Hence, the dog is desensitized.

Like the others have mentioned, there is no ONE WAY to train and dog and it is only in your opinion that flooding is detrimental to a dog's mental health. I personally think it could be beneficial in certain cases. Needless to say, there will always be controversy within the world of dog training and not everyone is going to go for "treats-praise-lovey-dovey-100% PR-kissies" training. That's certainly not how Schutzhund dogs are trained, but we can't blame them either.

I think training is just like dog food: Use what works for you!