It is perfectly all right to watch the hands--in fact, it is a critical learning tool--and you can learn a lot by watching music videos(especially UNPLUGGED)--the thing about guitar is that there are a lot of different places to play the same thing, so hearing alone is often not enough, you have to know where:what frets, what string, which fingers, which chord inversions--and they are not always obvious from what you hear--

And the goal is not to learn to play something by ear--ear training is an important tool, but it is one of a number of important tools, and ear training alone will only get you so far--

Some of the problems with working things out by ear are that your ear often mis-hears melodic variations and subtle ornaments, that you will often hear notes that are only implied through harmony or as harmonics, and that you will confabulate, which means that you fill in things that you missed with things that could logically be there, without realizing it--