Thanks for the replies everyone, this was interesting. Sounds like there's not many people who share my reservations.

I think that many of you were talking about using your eyes to learn new chord fingerings or voicings or general tricks, which is fair enough, but wasn't exactly what I meant. I'm just talking about knowing when to play the I, IV, and V chords in an unfamiliar I-IV-V song.

Is the ability to do so by ear not a reasonable thing to expect from myself after playing for a few years?

I was also thinking that if I want to be able to play not just in a big jam but in a group where I'm the only guitar (hey, it could happen) or in performance where everyone's sideways to each other then a habit of chord-watching wouldn't serve me well.

That's pretty cool, Ian, about being able to read the back of the other's players hands - is that how you do it too, Phil?

M.Ted, you said: "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-- "

True, but is that really a problem?

Marion