Dan, I agree wholeheartedly that solo work is essential to develop the artist - whether conditioning, attributes, reactions or responses - but in terms of developing the practice and execution of the art itself, no amount of insight and conditioning will work if you have no practical feedback to relate it to.
The reason this is so important is precisely that you are developing a style unique to yourself, and that makes it imperative to have regular reality checks. One can develop all one wants, but if it's from a weak base then it's worthless - heck, anyone can develop their own style (and far too many try to!) without going through the difficult step of testing it. And testing it against a resisting opponent, once the flow and movement has been functionalised, is also key; a week's practical 'sparring' is preferable to a year's video courses or book-reading when learning to manipulate someone's balance or time a counterattack.
I'm not knocking kata for arts where one has to learn a set pattern of movements and philosophy of moving; they're a great tool for ingraining muscle memory in that case.
The sex analogy is amusing and true, as far as fighting goes; you have to interact with someone else, and no amount of fantasising what a fight will be like will prepare you for someone there in the flesh, with their own ideas of what will happen.
Moving through a crowd quickly and with minimal contact is a good drill. Also, picking a fixed point on, say, a door jamb or a post and making light contact with a forearm or shin, then moving around it keeping a constant light, sensitive pressure on it. Once that's under control, use a moving point; a hanging bag, say, or a door, or a chain. Make sure your footwork is always strong and aligned.
Another useful drill is to pick a point, then close your eyes and move. Without opening your eyes until contact is made, try and strike the point. This is great for spatial awareness, and comes in very handy when vision is restricted by poor light or your opponent's actions.
And, of course, the more work done in transitioning from standing to the ground and, more importantly, from the ground to standing, the better.