Practicing is not listening to music. Yes, you must listen while you practice, but you do so expressly in order to detect mistakes and inconsistencies so that you can correct them. You cannot expect to be able to play for the pleasure of listening without first learning how to play!
Improvisation is always good, especially if you are playing what you hear in your head (as opposed to playing, and then hearing what you played). If you have an imbalance of head-creativity to physical technique, then you should really work on reigning in your improvisational head-creativity to the place where it is within your zone of proximal development for your physical technique. Once you know where that zone is, you can make a plan for expanding your physical technique to the point where it is more in-sync with your head-creativity. This is where real practice comes into play--my internal monologue might sound like:
Okay, I hear a riff in my head that I can't play immediately, but I can transcribe it and play it after a few minutes of practice. Now, let's turn it into an idee fixe, playing it over and over again in different rhythms, then do the same in all 12 keys, then play it in a few different modes, then invert it, then reorder the pitches...
There are a lot of possibilities there. You don't have to do them all, but those that appear to you as useful and relevant to your head-music can get you hours of practice that will develop technique that you didn't have before.
Efficiency of practice
Understand that your musical brain is made up of all of the music you have ever heard before being remixed and influenced by other non-musical stimuli. This means that the music you come up with in your head has roots in and shared technique with existing pieces of literature.
This is where notation comes in handy (and I see you mentioned you play mostly by ear, but bear with me)--you can use those existing pieces of music to help develop the technique that you require in order to play the music your own head comes up with. Identify what literature influences your creative mind, and then learn how to play it! The alternative to learning from existing sheet music is to learn after transcribing everything--either by actually writing down the music before playing it or by playing it by ear. Transcribing is an incredibly valuable skill, but when you do it you are spending time exercising your ear to figure out the piece that you could be devoting towards developing the technique to play the piece. If you want to practice more efficiently, you need to figure out the proper balance for what you want to achieve.
It is for this reason that learning to read music is a required skill for virtuoso-level playing in the western classical tradition. Exceptions can be made for certain traditions passed down aurally; you will find some great jazz and folk musicians with virtuoso-level talent, but those traditions are not reliant upon sheet music in the first place, AND in almost all cases these are people whose creative minds have grown up in sync with their technique. For us, we need to be a bit more strategic.
Composing music is GREAT, but it can be a daunting task. There is some wisdom to just putting in the hours--even if you spend an hour a day writing motives on scraps of paper that you end up throwing away or never use, that's still something. Writing lots of little pieces is going to benefit you far more than spending the same amount of time on one large piece. Particularly, if you are having trouble just getting something DONE, you need to make sure you set your compositional goals as achievable as possible, and give yourself STRICT GUIDELINES and limits to your compositional process.
One of my teachers once told me that creativity does not come from complete freedom, it comes from limits. It took me a LONG time to realize she was right, but the point is IF you give yourself some artificial rules to follow, for example:
- Compose eight bars of music in 4/4 time using only the notes in D major and related secondary dominants.
- Write a 16-bar two-part invention in the style of Bach.
- Write 32 bars of music based entirely on a three note theme x y z.
- Write 3 bars of music consisting solely of rhythms and articulations on the pitch A4 with a clear beginning, middle, and end.
... then you will find ways to be creative within those constraints, and the same constraints will make it easier to actually finish pieces. The constraints above I made up off the top of my head, but I'll list below some specific composition exercises that my teachers have assigned that could be useful:
- Arrange "Hark, the Herald Angels Sing" for solo piano by reharmonizing.
- Be handed a sheet of staff paper that is blank except for the first bar of music, which has been provided for you. You must fill the remainder of the page. You have 40 minutes.
- Set the text of a poem of your choice as an art song. (This one is nice if you have problems determining your compositions' pacing, since that will be decided for you by the text.)
So, the above won't work for everyone, but hopefully it will provide some food for thought on a few of the topics you mentioned. Essentially, don't become discouraged by perceiving yourself as lacking technique, instead, become motivated to develop that technique so you can put it to use! And, as Steve Vai has been known to say on occasion:
"If you want to play something that you can't, you need to see and hear yourself doing it in your minds eye. It will start to happen."
To paraphrase: if you can visualize yourself playing/improvising/composing the way you would like to and with the facility that you desire, you've already taken the first step to achieving that goal.