It doesn't kill it, but it limits it potential.
But it's not often a system where you can start the game competent. Lands of Lore did it well IMO, but mainly because you could choose your PC (and be a specialist or a generalist), who then gets better by doing. What I do not like about 'learn by doing', is that I haven't seen many games using it that offered more than an adult infant PC; A fully grown person with no past interests, starting the game as a complete novice in everything. One can't really play a cunning pickpocket, instead they have to tediously build one by going through the motions with them in real time; something the character could have done years before the game began, and already be an accomplished professional at the start of the adventure.
I'd much rather roleplay the experienced semi-professional, over the novice trying to become one. [IE. I'd prefer to roleplay Kwai Chang Caine the priest over Kwai Chang Caine as the Grasshopper; where the former is trained, knowledgeable, and confident; while the later is still an untested student trying to graduate.]
In D&D, a 1st level fighter is a trained fighter, as is a 1st level mage a trained spellcaster.
LBD skill systems seem to favor fighters and spellcasters, because combat is usually far more frequent than lock picking, or trap detecting; and if picking a lock can only award once, how can one hope to become an expert; without spending the whole game hunting every lock you can find, and picking it for the XP?
I do prefer stat influenced skillsets; where the stat level indicates the PC's degree of aptitude for the skill. Someone who is a natural athlete seems more able and likely to excel in sports than a natural linguist with no interest in athletics. That doesn't mean that their affinity must match their aptitude... just that certain skills would seem easier for them to develop.