Epsilon-delta definitions are obviously better than infinitesimal-based definitions because of tradition dating from the heroic era of Weierstrass's disciples.
On the other hand, in an old comment, Deane Yang mentioned that engineers have no use for the first quantifier in epsilon-delta definitions, since they have a certain fixed allowable error (i.e., fixed $\epsilon>0$), for which they are looking for a suitable $\delta$. For example, if some engineering problem is formalized by a function $f(x)$ at a point $c$, then for a fixed $\epsilon_0$ engineers will be faced with the following problem: determine whether $$ \exists \delta>0 (|x-c|<\delta \longrightarrow |f(x)-f(c)|<\epsilon_0). $$ This problem contains no quantifier alternations at all. It is specifically the quantifier alternations that are famously the source of the difficulty for students learning calculus. People sometimes mention engineering applications as justification for working specifically with the epsilon-delta definition, even though it has more quantifier alternations than the equivalent definitions using infinitesimals (for example, continuity of $f$ at $c$ is expressed by the condition "if $x-c$ is infinitesimal then $f(x)-f(c)$ is infinitesimal"). But given the analysis above, epsilon-delta definitions with their quantifier alternations are mostly irrelevant to engineering applications. So the idea that the difficulty of epsilon-delta definitions is justified by their usefulness in practical applications would seem to fall off.
There are additional reasons why epsilon-delta definitions may be preferable to infinitesimal ones, such as tradition (as per above) and the fact that an ovewhelming majority of schools and universities use the epsilon-delta approach. But:
Question 1. is it correct to assert that the specific reason based on engineering applications and the like, falls off as per the analysis above?
The assumption that epsilon-delta is somehow helpful for practical problems of approximation and estimation (and more specifically for engineering students) can be traced as far back as 1977, when Bishop wrote:
"(ε, δ)-definition of limit is common sense, and moreover it is central to the important practical problems of approximation and estimation" (Bishop, Errett (1977), "Review: H. Jerome Keisler, Elementary calculus", Bull. Amer. Math. Soc., 83: 205–208, doi:10.1090/s0002-9904-1977-14264-x)
It can also be seen in this highly upvoted 2012 answer to an open question: https://mathoverflow.net/questions/88540/how-to-motivate-and-present-epsilon-delta-proofs-to-undergraduates/88561#88561 It precedes Gubkin's 2014 answer at the Education SE.
Another response assuming that epsilon-delta is necessary for engineering students: https://matheducators.stackexchange.com/a/20803
A similar assumption is made in this recent article by Hill and More:
Hill, G. More, T. "Connecting experimental uncertainty to Calculus and to Engineering Design". Journal of Higher Education Theory and Practice 21(5) (2021), 208-213.
Question 2. Are there earlier sources for the assumption that epsilon-delta is helpful to engineering students, preferably in a calculus textbook?
An interesting case study is the textbook by Thomas and Finney. They often emphasize engineering applications. They also talk about error tolerance (pages 68, 69, 70, 103, 106, 253, 272 of the 9th edition). But significantly, they view discussions of error tolerance as a way of motivating epsilon-delta definitions (whether they are successful is another matter). They never present epsilon-delta definitions as useful material for engineers to learn as a way of preparing them for the idea of error tolerance.
Gubkin wrote: "I hope you can see that the basic form of the ϵ-δ argument does mirror the sort of analysis that a practical user of mathematics would need to employ when they are thinking about error in their measurements. Making this connection is, in my opinion, important to motivate the ϵ-δ definition of continuity." This is true, but it does not follow that engineering students should learn epsilon-delta as motivation for error tolerance. The motivation goes the other way, as illustrated by the examples in Thomas and Finney.