"Flashcards are actually pretty good for acquiring masses of vocabulary. But it doesn't help you put those words together coherently or even enable you to comprehend what you hear."
In my experience with Japanese, using flashcards for kanji doesn't really help with long-term memory acquisition.
I agree with your latter point about context; it's better to find an unknown word in a sentence and look up its meaning, then you tend to remember the word longer b/c you understand how it's used.
Have you tried using Heisig's "Remembering the Kanji"? I have never tried to learn Japanese, but I have heard very good things about using this book to learn the Kanji.
For anyone using "RTK" I recommend using http://kanji.koohii.com/ . I also recommend that you actually write the kanji out (on paper, or even just tracing it out with your finger in the air) when reviewing, and only consider a kanji remembered when you can render it properly, with the correct stroke order.
My method for learning kanji was to count the strokes (it's relatively simple to figure the stroke count for any character: http://infohost.nmt.edu/~armiller/japanese/strokeorder.htm) then use that number to look them up in a dictionary.
But everything I looked up was in the context of a sentence, while trying to read a report at work, e.g.
I don't remember which set I tried, but their characters seemed disjointed/random and, worst of all, unrelated to anything I was doing at work.
I just found it better to try to read the reports and memos being passed around at the office, and once I looked up kanji I didn't know, I would tend to remember them, since I'd read them in the context of a sentence.
You can use flashcards to learn kanji. The problem is trying to learn them without context and by learning their readings rather than by learning the reading via learning vocabulary which use the kanji you want to learn.
In my experience with Japanese, using flashcards for kanji doesn't really help with long-term memory acquisition.
I agree with your latter point about context; it's better to find an unknown word in a sentence and look up its meaning, then you tend to remember the word longer b/c you understand how it's used.