While it likely depends on definitions of mental disorder and the diagnostic procedure (especially on the eve of a new edition of the DSM), this number is not too high. It is too low.
In this study 7076 Dutch adults were interviewed and given a psychiatric assessment.
Some 41.2% of the adult population under 65 had
experienced at least one DSM-III-R disorder in their
lifetime, among them 23.3% within the preceding year.
Note that this doesn't even include the second part of their lives after the interview. So the lifetime risk is likely to be considerably higher than 41.2%
In Table 1, they break it down to show major contributors include Major Depression (15.4%), Alcohol Abuse (11.7%) and Simple Phobias (10.1%).
Attempts to measure the incidence of mental disorders in a Swedish population, based on 24,000 person years observed. The estimated cumulated risk of developing a mental illness for men is 43%; for women, 73%.
Given these studies, the estimate of 25% lifetime incidence of mental disorders is low.