75% of the faculty, including myself, would not recommend this action but 25% recommend it strongly and are in the most relevant subfield. After some consideration I decided I would write a lukewarm letter in favor, because if not the person in question would not have the requisite three letters.
I reasoned that I would help make it possible for him to even apply for this fellowship; if the committee liked the proposal and bought the other two letters, they could disregard the faintness of my praise. This was probably a bad idea although who knows – there may be money which must be distributed, and this person’s project may develop well in the end.
I explained these things to the applicant who thanked me profusely and now has questions on his proposal draft. After a brief conversation, I discerned that he does not fully understand his project. I edited out the phrase “your honorable program” but not “The prestige of your program has motivated me to apply.”
In part, I was at a temporary loss for how to explain to someone who doesn’t see why that is not a helpful sentence, that it isn’t. In part, I felt the proposal they wrote should be the one they wrote.
Axé.
coldhearted scientist وداد 
Though I can see your reservations, I think this can only benefit the applicant. Grant applications forced me to articulate the details of my dissertation proposal in ways that my graduate program didn’t. Even the rejections helped me, although I wouldn’t have said so at the time.