I think it depends on who you are. Some people thrive on theory, others are stifled by it.

People who are [u]too[/u] into theory tend to think "you can't do that, it's not in this key." Well, yes I can do that, and I will do that because it works in this context. Some of the most interesting music I can think of throws traditional music theory out on it's ear and goes it's own way. I think if you feel an uncontrollable need to write a note as A-flat-flat, you need to loosen up: it's a G, get over it.

Theory especially helps me out with rythmic work: it's kinda hard to play in a screwed up time signature when you don't know how to count it. This is one of the areas I feel I need a lot of work, and I try to explore from time to time.