Cross-server grouping did kick 'community' in the bollocks a fair amount, but frankly what kind of community did WoW have in the first place? It was hardly stellar at the best of times anyway. Another issue with the LFG System was that it cut out any travelling to instances whilst in TOR (as I have already mentioned) they are all aboard the fleets anyway.
The problem really is the word 'community.' in this argument. It's take to mean some kind of pollyanna where everyone helps everyone. True. World of Warcraft never had THAT kind of community.
But they DID have a community where good sociable players could find groups very quickly and bad selfish players couldn't find anyone to bring them with them.
This is the main problem that cross server dungeon finders caused in WoW. In short - it doesn't matter if you suck. You can just queue and go again. In fact a tank - considered the pinnacle of skill can requeue the fastest of all if they suck. So they can easily 'group jump' to find a healer/dps to carry them.
And as someone that played in WoW before and after the Dungeon finder it really matters.. You want from PAGES of friends on your list to almost none because no one bothered to group manually anymore.
Of course this is just the start of the problem from a game designers perspective. The REAL problem is that a cross server group system speeds the forming of groups and lowers the quality of said groups. Thus you have to weaken your dungeons to compensate (people do not like repeated failures) AND make your players run them over and over..(you cannot have your players quickly out gear your content).
I'd rate this as equally bad if not worse then the side effects that ruin the community.