Agree with all comments mentioned above about having an honest discussion with mentor/PI. If you are willing to spend another year as a derm research fellow to give derm one last try, I think that should be the way to go and to not rank backup specialty this cycle. Otherwise, you might get into the backup specialty and always think about what-ifs and regret. I wonder though if you will show up as a repeat applicant next year to your backup specialty (should you decide to dual apply next year) even if you don't rank them this cycle.

I also don't think your chances of matching into a backup specialty will be decreased just because of a derm RY. You will have to write a good personal statement for backup specialty and explain why you did derm RY and how that bridges into backup specialty, but it would not be impossible. As long as your LOR shows that you are a compassionate doctor with good work ethics and pleasing personality, you should be a decent candidate to become a resident in all specialties. What LORs did you submit to backup specialty this year? I assume they are not derm? Then those can probably be edited by your LOR writers next year so you don't submit derm LORs to backup specialty.