I wouldn't argue that there is anything "better" or "more noble" about NOT reading music -- just that it isn't necessary (not for everyone, anyway). Some folks recommend it highly, because it has been very helpful for them, but many legendary folk musicians have managed to do quite well without ever reading music. Whatever floats your boat.

You *do* need to develop a knowledge of harmonic theory, though, whether or not you ever learn to read sheet music. This may be largely instinctive for some people and the product of "book learning" for others.

A *good* teacher is to be preferred to working exclusively with books, tapes, etc., but you need to find someone who fits with the approach you want to take -- that is, someone who plays pretty much like you'd want to play. With luck, you'll find someone on the same wavelength as yourself vis-a-vis style, genre, intellect vs intuition, etc.

I second the nomination of Jerry Silverman's book for starters -- then look into Stephen Grossman for fingerpicking when you're ready to get into it a little deeper.