A little background first:

I started learning songs from tabs. I used to know music in the treble clef but haven't read in over four years, the only scale I know is C-maj and I have a tough time making a good song from arpeggiated chords. Ever since someone told me "For easy improv. just play on the dotted frets" that's what I do even when I try to break out of this.

Now on to the issue at hand. I know these are all very bad habits and I want to learn actual music theory, I know of a very good teacher who charges $40 and hour; but I've also had people tell me that I can learn everything a teacher can tech me out of a book. So is there anything a teacher does besides show me how to read music/practice theory? Because that I can teach myself with some willpower.

I say that you get a teacher, becasue a teacher can be beneficial in more than just learning theory. You may learn theory out of a book, but will you be able to apply it? A teacher will teach you theory, how to apply it, and much more. A teacher will also teach you how to groove and play with others which is something that a book most definatley will not teach you. Finally, when you get better, a teacher can reccomend you for gigs and notify you about gigs and local events, possibly resulting in getting you more known.

That said, make sure your teacher is good and focuses on technique,groove,theory and everything not just "Song Teaching" and also remember that your teacher is not your only teacher, you can learn from others as well as yourself. If you want to learn something, whether it be a song or technique, or theoretical concept while your teacher is focusing on something different learn it ON YOUR OWN. you don't need a teacher to teach you EVERYTHING you just want a teacher to get you started on your own. the "Give a man a fish" thing comes to mind. I know some people who are too dependant on the teacher for everything, they have to be hand fed music. They cannot learn songs on their own, or do anything on their own without a teacher.

Also the "play where the dots are in the neck" is pretty untrue. I know you acknoledge this I'm just letting you know, because if a song is in say Bb major then playing the dots won't get you very far. And if a song is in any other key the fretting will change depending on whether it is major/minor/or diminished/Augmented.

Well have fun and GOOD LUCK:bassist:

(P.S. one more thing, LEARN HOW TO READ WELL. Don't accept a teacher who doesn't teach reading)

I've also had people tell me that I can learn everything a teacher can tech me out of a book.

That may be true to some extent when you're an experienced player and already developed good practice habits knowing exactly what to do, but it doesn't work with a newbie. You need someone who shows you your mistakes.

She teaches bass lessons for the local college and one of my acquaintances took lessons from her and now he's in musical school (he's actually who referred me) so I'm guessing she's a pretty good teacher.

I thank you both for you responses, I'm definitely going to take her up on it now.

That said, make sure your teacher is good and focuses on technique,groove,theory and everything not just "Song Teaching" and also remember that your teacher is not your only teacher, you can learn from others as well as yourself.
My first (and only) bass teacher was a song teacher. All he did was teach me songs off CDs. When I finally got around to auditioning for bands, I was completely lost. None of the bands had bass lines written (I'm the bassist, writing the bass lines is apparently my job) so all I was given was the chord progression. I had never dealt with that before because of how my teacher approached things.

The best thing for my bass playing was taking guitar lessons for a year. Learning how guitarists view the world helped me out immensely. I then had a better understanding of what chord progressions really meant, what slash chords are, and what the whole augmented, diminished, and whatever else they wanna do to the chords stuff meant.

My first (and only) bass teacher was a song teacher. All he did was teach me songs off CDs. When I finally got around to auditioning for bands, I was completely lost. None of the bands had bass lines written (I'm the bassist, writing the bass lines is apparently my job) so all I was given was the chord progression. I had never dealt with that before because of how my teacher approached things.

The best thing for my bass playing was taking guitar lessons for a year. Learning how guitarists view the world helped me out immensely. I then had a better understanding of what chord progressions really meant, what slash chords are, and what the whole augmented, diminished, and whatever else they wanna do to the chords stuff meant.

Obviously you chose the wrong bass teacher. Teaching songs from a cd without any grounding in music theory or other concept development is not really what I would call proper instruction and basically that person was ripping you off. A good bass tutor can teach you exactly the same theory as a guitarist. In fact I have taught many guitarists theory myself. The one thing you are unlikely to get when you take lessons with guitarists is attention to technique and bass-focused concept development. Unless you are really lucky, not many guitar tutors understand how to apply bass beyond playing the root note of the chord structure.
A good tutor will start with the major scale, tell you why you learn it and how you use it to analyse and compare every other scale and western theoretical concept, then teach you the relativism of modes, triads, 7th chords and so on. You probably could learn everything a teacher can teach you from a book, but having someone there that knows what they are doing to guide you and help correct any bad habits you might be starting to develop as well as answer any questions you might have as you go can and probably will save you a lot of time and confusion.

I've also had people tell me that I can learn everything a teacher can tech me out of a book.

Is a book is going to analyze your playing and help you define your weaknesses and give you specific things to work on to strengthen them?

A book is going to see that you're not "getting" a certain explanation and try to say it a different way that you do get?

Can you go hear a book at a gig and get stoked about getting to study with such a great book?

Are you going to ever become friends with a book and the book will give you gigs?

Is a book ever going to say, "I've taught you all I can kid, it's time you moved to New York City"?

A teacher can do everything a good book can but a book can't even come close to doing all the things a good teacher can. You just need to find the right teacher.

Go with a teacher if you can afford one. Ask alot of questions. Once you have the basics down in a few weeks and start on some theory, your whole bass world will change. If your not learning something new every lesson, find another teacher.

You guys are awesome, best advice I've ever gotten, thanks again all.