Yes, Nietzsche grasped quite clearly that exceedingly few people have the courage to endure the world "in itself." Most people persist their whole lives trapped in elaborate fantasies. This is something that, Nietszche suspects, has been true since the dawn of time and recognizes it as an essential human characteristic (herd instinct).
Science causes a kind of crisis. ("God is dead.") After millenia of extreme devotion to all manner nonsense (think of the religious wars that plagued Europe) science starts asking some very uncomfortable and very pointed questions. But people will not abandon their fantasies, even in the face of overwhelming evidence to the contrary. Instead they will cling to their fantasies that much harder often with full knowledge that what they "believe" are lies. This metastasizes into fascism [1]. When Trump says climate change is a Chinese hoax he knows he's lying, and you know he's lying, and accusing him of lying would be pointless and that's the point. Nietzsche foresaw quite clearly that this would be the crisis of the 20th century and beyong: in the face of science people would become more willing to deceive themselves.
What Nietzsche proposes against this isn't some tired paean to "human excellence." Leiter here gets very literal and selective here. Nietzsche does not think that art or philosophy or dance can stand against the ever rising tide of fascism. It is what motivates these things -- the will to power -- that is the only defense against self-deception. All fantasies are born of fear, a fear of change and growth and death. But there also exists in some men a desire for change and growth and death. (Indeed Nietzsche will come to believe that the will to power is a kind of cosmic necessity.) The only hope that societies have against falling to fascism is cultivating precisely this opposing force which Nietzsche understands not as some mere "will to truth" or "will to excellence" but a far more primal "will to power" that motivates men to plunge into the unknown and confront their own mortality.
[1] "In an ever-changing, incomprehensible world the masses had reached the point where they would, at the same time, believe everything and nothing, think that everything was possible and that nothing was true. ... Mass propaganda discovered that its audience was ready at all times to believe the worst, no matter how absurd, and did not particularly object to being deceived because it held every statement to be a lie anyhow. The totalitarian mass leaders based their propaganda on the correct psychological assumption that, under such conditions, one could make people believe the most fantastic statements one day, and trust that if the next day they were given irrefutable proof of their falsehood, they would take refuge in cynicism; instead of deserting the leaders who had lied to them, they would protest that they had known all along that the statement was a lie and would admire the leaders for their superior tactical cleverness.”