Having gone through spurts of 100% solo practice and a mix of solo and competition, I think can speak to this question fairly well.
I think if you decide to spend a year or two only playing by yourself and practising in a structured way, you can certainly improve a lot. But even if you have prior competitive experience, going a long stretch without competing will have consequences. Any time I have returned to competition after a long time, even though I've been practising consistently, I am rusty. The only way I will win a tournament on my first try is if the competition is well below my ability such that they can't take advantage of my mistakes. It's the unfamiliarity with the pressure, the weird situations that can arise, different players antics etc. All of the stuff that can be really difficult to simulate on the practice table.
One other thing to consider. If you practice on your own for a long time and make a jump or two in ability, that can also cause some growing pains. Improving can often mean adjusting your shot selection to take advantage of your new ability. Suddenly that low percentage shot is not all that low percentage anymore. But you have to find a balance and I think it's easier to find that balance if you've been competing the whole time because it's a more organic process.
I had got in the habit of pushing the boat out more in practice and taking on a few more risky shots to keep the run going and it often does work. But you don't really learn how low percentage a shot really is until you've tried it in competition. That happened to me last fall where I returned to tournament play and got crushed by a great player because I took too many liberties. They go in during practice! But you only need a few key misses to lose matches against great players.
