Just try and remember to get some writing done Reading is great and you should definitely continue, but it's no good only remembering definitions of words without remembering how to use them. You should always be reading as you're writing, or alternate - one month of reading, one month of writing, that's how I did it as a kid. Having good vocab doesn't mean you can write well - the trick is in using the right words in the right way at the right time. Getting good vocab helps you with the first step, and reading to some extent helps with the rest of the steps, but you only really start writing well when you, well, start writing!
Words need to fit the context or style. Writing should be clear and allow for fluid reading. So yeah, you don't need to Use a lot of 'big words' but it's good to have a wide rang of vocal to avoid repetition. I always tell my students they need exposure - listening and reading - and practice - speaking and writing. Most of the time, new vocal only sticks once it's been understood and used a few times.
Depends on how you use 'em. The right words are the best words. Having a large vocabulary just gives you more to choose from, which can definitely be an advantage. Like a few others have said, you just have to know to string them together.
I find that simpler is better. While English majors and readers/writers might enjoy a well placed 10-character word, the average reader might not want to look something up, or like myself read with a dictionary/Thesaurus handy.
This summer, I've actually been working on augmenting my vocabulary, mostly because I plan to take the GRE test in the near future. My method has just been to read a variety of books, write down the words I don't know, and look them up at the end of the day (because I HATE stopping in the middle of reading). What I've found is that the writers I like the best use big or obscure words only when they are the RIGHT words. Using erudite language for the sake of sounding smart is nothing if not irritating. But sometimes, there IS a perfect word out there to describe what you're talking about. Probably my favorite one is "valedictory", which means pertaining to or by way of farewell. I learned it from Christopher Buckley's latest book, and the sentence it's from is: "Myndi had taken the bottle of Percocets when she left—a punitive, valedictory gesture." The main character has been injured in a car accident and is in pain, and his wife leaves him because she discovers he is having an affair. Really, "valedictory" is simply the perfect word to use there. Honestly, for me, I think of learning vocabulary as gaining new tools for my writing and reading and as a way to become more proficient in my native tongue. There are a huge amount of words I've learned that I will never use, among them several words for 19th century carriages (I read a lot of historical fiction) and a few rather obscure words I learned from The Somnambulist by Jonathan Barnes (among them "etiolated" and "lepidopterist"). However, there are many basic words that have now entered my vocabulary that will definitely help me write with greater precision in the future, among them "pervade," "purloin", "inure," "demure" and so on.
Remember this next time you sit down to write: keep your writing as simple as possible without destroying your integrity. Have you ever seen novels where every sentence looks like the writer looked for the 10th synonym of the word "true"? Not often, and when you do see it, it's not fun. That said, don't write like a 10-year-old in a tree house on a Sunday afternoon, either. Have a perfect combination of complex and simple. If you find yourself looking at a dictionary to make sure you used a word correctly, you're not doing it right! Writing should flow off the fingertips as if second-nature. If you strive to be overly complex, your writing will surely suffer. Trust me!
Trust me when I say "listen to these guys!" I graduated high school with a 4.3 gpa, and over 1200 AP-level words to chose from. With most of them committed to memory, and even practice in essays, I've been using them for 2 years come to find they aren't a huge help. It isn't that I tried too hard to be educated, but sometimes that word that is the exact fit for what you want to convey is not always the best fit contextually. As they have said READ A LOT, and WRITE A LOT. the tennis example is great. Or even for me, I taught myself how to throw dicsus [I didn't have a coach for 4 yrs -_-] I watched pros online, but I didn't get better without practicing the motions that worked. Finally, as I said before, it is great to have a dictionary or thesaurus at hand, not to use an expanded vocabulary, but to remind you of the one you already have/. Often when I use my thesaurus, its not to find bigger words, its to find the most powerful or effective words, which can honestly turn out to be the simplest form. The thesaurus really just gives you options.