I can relate to your story Jedi. When I had started taking piano lessons my teacher (who required scales and reading) said if I didn't practice she wasn't going to teach me. Boy talking about an opportunity to kill 2 birds with one stone. I still continued playing by ear and enjoying the music. Then we met a guy playing in a restaurant and my Mom (as moms will do) encouraged me to play for him. He liked my style and them became my teacher for the next 3 years. The first lesson he looked at me and said: "I heard you don't like to practice. That's OK. I get paid anyway ."
Well he was very good and allowed me to play whatever I wanted. I didn't know how to read music when we finished (without going Every Good Boy...) but he taught me a LOT of theory to use for playing. I also would watch his hand movements and memorize them. I used this method to play for the stage band in High School.
Now I can read right hand pretty well and due to the fact of learning a lot of theory can use the Fake Books to quickly learn a song I didn't know before. It is still easier if I have heard the song since I still play by ear along with the radio and tapes.

I now use the sheet music for some songs and memorize others for the same reasons Roel listed.

So I guess my answer is all of the above. The mores skills you have the better.

- Brian
(If you do what you enjoy you never have to work again.)