This quote from the Rebbe below is excerpted from an English letter addressed to Mr. Nissen Plotkin printed on pp. 20-21 of the Plotkin-Bluming wedding teshura (memento) here.
As for your question with regard to my attitude towards the Holy Land, etc., I trust you saw my reply to the question “what is a Jew?” which has been published both in Eretz Yisroel and here is America. Your particular question with regard to emigration and settling in Eretz Yisroel does not indicate whether it refers to yourself or is in a general way. But my answer would depend on the circumstances of each individual, for it is not possible to give blanket advice on such an important question.
I should like, however, to emphasize one general point. No matter how much it is expected of a Jew in regard to the Torah and Mitzvoth, wherever he may be, a great deal is expected of him if he is in Eretz Yisroel, of which the Torah says, “It is the land on which the eyes of G–d, thy G–d, are from the beginning of the year to the end of the year.” So much so, that it is regarded as a Holy Land even among non-Jews. Our Sages refer to it as “The Palace of the King.” A person wishing to enter the Royal Palace must be prepared to answer such questions as on what business he is there, and he must be properly prepared in every way. It is demonstrated by his conduct and his actions that he realizes that he is in the Royal Palace. It is surely unnecessary to elaborate.
May G–d grant that you will succeed in what is your true and inner purpose in life, namely, to spread Yiddishkeit, and in an ever-growing way, and may you have good news to report always,
I find the first part of this letter of special note. In the vast majority of the letters or private audiences I’ve had the privilege to read in which people ask the Rebbe whether to move to Eretz Yisroel, the Rebbe advises against it, explaining that that person is needed to influence the local community in the diaspora. I had understood this consistent theme to imply that the Rebbe holds that it is always undesirable to leave one’s place of living, even if it means moving to Eretz Yisroel, because using one’s local established sphere of influence to spread Yiddishkeit is a form of spiritual lifesaving (hatzolas nefashos) that takes precedence over the Mitzvah to live in Eretz Yisroel.
However, here the Rebbe does not discourage this move per se, specifically saying that his answer “would depend on the circumstances of each individual, for it is not possible to give blanket advice on such an important question.”
One thing is clear from the other letters (see, for example, those printed on the topic in “The Letter and the Spirit”): The Rebbe holds that exerting influence on a community in which one is already established overrides the Mitzvah of yishuv ha’aretz, which would mean losing that influence and most likely not regaining it in one’s new location.
However, not everyone holds such a position of influence. For them, this reason to stay would apparently not apply.
The Rebbe’s only qualification is that one should make sure to prepare by increasing in holiness in a way befitting for one entering the King’s Palace (this is, of course, an idea first mentioned by the Tashbetz, student of Rabbi Meir of Rotenberg).