It seems to me that the no-context disadvantage (for learning single words) applies mainly to learning vocabulary for production. For comprehension, a lack of context is probably fine. Context is provided when you encounter the words in the world.
For myself, single-word learning is efficient and effective—but I am cautious about using those words until I’ve seen how they’re used in context.
I agree with the disadvantage of having full sentences in SRS. Maybe other people’s brains work differently, but my own brain is fully capable of learning that “when the word ‘fortunate’ appears underneath the word ‘day,’ the answer is…” without even needing to think about the meaning of the word in question.
When I make Anki decks for my Spanish students, I do a mixture of single-word and sentence (cloze) question types. For the cloze types, I use very simple vocabulary words in the sentences, so that there are fewer misleading cues for the brain to hang on to. For example, if I want them to learn “I intend to…” I won’t say “I intend to vote tomorrow because I hate that candidate.” I’ll say “I intend to eat.” And another cloze sentence says “I just ate.” And another one says “I like to eat.” In other words, “eat” can’t trigger any particular response, because it appears so often.
One approach that would avoid the trouble of unintended cues is to do single-word study, but to include an example sentence on the answer side of the card. And, additionally, you could have a cloze question for producing the vocabulary word.
On rote learning: I don’t actually think rote learning is bad per se. It’s only bad when it’s all that you do, or when you don’t apply it, or when you don’t know how to apply it. Rote learning can be highly effective and lead to efficient learning. In my classroom we tend to be doing either rote learning or fairly unstructured speaking, with very little in between. I like the results of this.
And I agree with reading whatever you can manage! It doesn’t much matter whether you look things up or not, or what you read; what matters most whether you enjoy it enough to keep studying.