Are they learning chess? No they are learning chess theory, not chess.
Playing games is critical for students' growth. We want to be better chess players, not great theorists. Only playing a lot of games can help translate theory into reality, and transform knowledge into intuition.
Playing at class is limited because the time limit of the class. You can only play one or two games at most. The time for playing games should be 5:1 relative to the lesson time. In fact, it's best that you play everyday.