Dear Mesivta,
I disbelieve a lot of what you wrote. Reb Yehoshua Leib may have said it to explain the trend. He did not institute any standard or style of dress. The Baal Habatim of Lita had enormous respect for the Yeshiva Bochurim. Meals in Yeshivah predated the Haskalah moving into Eastern Europe.
Bochurim need to study and learn. Kavod Hatorah is for everyone else. If we still were wearing rags we may have much stronger yeshivos today. Higher standards of dress was not the critical reason for the rebirth of the Yeshivos in the last days of Europe.