"Of course, ask them to play something of their own, or have a jam session and ask them to come up with something and it's nothing but a lot of fret buzz, pausing, and bad excuses. "

Jam sessions are excellent to improve your knowledge. Every session i learn something new and get to work with until the next session. It's for me important not to do to many things in the same period. Concentrate on one scale or mode and chords at the time and work it out before moving to another. I sometimes get a little overwhelmed by all the possibilities but as often in life you have to make a choice. The jam session leader is a great guitarist and now i take some lessons. I hope my playing will improve much faster with these lessons.
So theory and practice go together. If you want to develop you must also get into the theory.