I just practised scales and chords for years. I didn't bother learning songs, I think I was too proud or hung up or something. All that theory really does help; I remember that when I learned
the Harmonic Minor scale I was absolutely thrilled and wrote my first half decent piece of music.
I'm not sure that it was necesarily the right way to learn though, most guitar music is pretty damn easy if you've been practicing technique and scales all the time. I know virtually no songs at all and sometimes that bothers me. Just this last year or so I've started playing along to other people's music, I've found it great fun. First work out the key without worrying how many wrong notes you are hitting, then, if you are not familar with the scale patterns draw out the fretboard with all the right notes marked on it. Finally just play along however you want to; it doesn't have to be right, give it practice and it'll get closer. I get the impression that most notes are not critical, they can be substituted so long as you don't go outside the scale and hit a clanger.