By the way, this is a great post. Anyone who's visited my band's site and seen the photos of me up front with the Jag may be surprised to hear that I'm actually a bass player. I only play guitar in the band because I write the songs on guitar and it's easier to strum and sing than it is to play bass and sing.
So, I empathise with the post a lot. Playing guitar in a live context is very much a learning process for me. I still don't really know what I'm looking for in a guitar sound sometimes. Fortunately, with an amp like my Twin that doesn't really matter because you plug in, turn it up (I don't think I've ever gone past 4) and it sounds great. I occasionally think a Strat would be better for me on some songs as the neck pick-up on the Jag is pretty nasty in a sometimes bad way.
I tend to side with the volume pot way of managing the sound, particularly with a tube amp. I'm currently working on the Electra distortion circuit and tweaking it to my liking and I've still not decided whether to put a Gain control on it or not. In a live situation I don't have time to alter pedal settings between songs so it makes much more sense to me for the Volume on my guitar to control the pedal's gain.
Like I said though, I'm a bass player - as little work as possible...