In this video you will see a college and high school pitcher performing the towel drill.
This video also shows a pitching instructor using the towel drill to demonstrate it to his student...the college pitcher. However, the instructor is also using the towel in a manner that does not replicate the correct arm motion that pitchers should be using when throwing a baseball.
If a pitcher cannot do the towel drill in way that replicates what happens when throwing a baseball, you should question how the towel drill will create any improvement...or if it is actually building in more errors.
In the above video, you should easily be able to see why the towel drill reduces velocity and adds stress to the elbow because the arm action is incorrect and the position of the arm just prior to elbow extension and ball release shows the elbow is leading the chest or trunk. That is a common pitching arm action error that is incorrect, reduces velocity, adds stress to the arm.