i think people here are putting too much into the reading thing. while i do think that read is important, and i do know how to read. i also play in a jam/cover band, i haven't had to read music in 5 years. if a band tells me to learn a song, i'm not going to try and find the notation for it. i don't even know where to look to find that! i think training your ear is the best solution for the OP.
now i agree, ditch the tabs. if you are playing covers find the chord charts, you can usually find the chord charts with the lyrics, that way if someone says back to the chorus, or take it to th bridge, or another verse, you know where to go if you don't know the song.
like i said before. once your in the right spot take a glance at the guitar, and start getting familiar with where his hands are, then you start associating his hands with what your playing, with what it sounds like. and just like that your ear is being trained.
please don't take what i said as "reading isn't important, don't bother learning it" all i mean is for the OP i think his ear needs more focus.
notice patterns.. most song are written in the same style. so chord changes will be more predictable. once you can feel the chord change, then you can start moving around and playing a fill that will lead into the next chord.
