By playing insane + nofail, you don't have the basics to even grasp what's actually going on, which results into button mashing and moving your cursor just in the general direction, hoping to hit something. This creates a lot of bad habits:
Button Mashing results in uncontrolled streaming. A lot of players get frustrated by a 1/2 note stacked underneath the last note in a longer stream, because they overstream. If you actually have the basics down before practicing streaming, you'll always pay attention to not clicking more than necessary, thus reducing the chance of overstreaming. You also expect to need to just click as fast as possible on any stream, and you'll have problems maintaining slower streams, while this is never a problem if you start from the slower ones and work your way up.
Because faster streams are more lenient to button mashing, even if you can control the speed of your fingers, you still don't have the fundamentals to move your fingers in a consistent alternating motion, resulting in 300-100-300-100-100-300-50-300-x-300-100 on slower streams.
Reading a map is combination of more than just seeing the notes. One of those factors is the approach circle. It's not a useless skill to be able to read approach circles, as they're often used to read anti-jumps.
Playing maps over your skill level will also mean you need higher reaction, which results in you paying attention to when a not appears, and then instantly hitting it. This works for maps with AR10 or hr playing, but you'll struggle A LOT on slower approach rates, because your brain expects to hit the note just as it appears. I know many players who can read AR10 much better than me, but think AR9 is too slow. If you start from the basics, you stimulate your brain to actually know that no, you don't hit a note when it appears, but ACTUALLY when the approach circle hits.
Other bad habits include shaky hands, which, if you start from the bottom, you can always maintain a steady hand, because you're always playing something around your comfort zone.
That's just some points. I'm not saying that playing insane+nofail is very bad or anything, but doing only that wont help.
Also Aqo, yes you get better at everything, even if you play normals.
Oh btw, I have a little under 70k plays now over 4 years, and I can say that I've never once used the method you describe, and have no problems becoming good at the game, while people I know who've done what you say, struggle with atleast one of the problems I describe above.
In almost anything, the basics must be there before you can become good at it.
And I still suck at streams, but that doesn't mean I can't stream, I just don't have the speed to do the faster ones, and that's something you can train AFTER you can stream.
Still, the best advice is probably just not caring about how to improve, and just play whatever you feel like and find fun; that's what I did anyhow, and no matter how fast/slow you improve, you'll get better while having fun, so it's worth it.