I've heard different shredders on here suggesting exercises and some saying to just learn songs outside of your ability. I used to just practice chromatics, scale shapes, non-melodic runs etc, and I slowly was able to put the metronome up a notch or two every so often, but they frustrated me. As the last couple of months, I've left exercises completely, now I learn songs from the likes of satch and gilbert.

But when I thought I'd try a few of the old exercises today, I had lost my speed on them. Even though the last song I learned to play was "You Kids" (well, not up to full speed :p I had difficulty getting the exercises completely clean. I used to be able to play some of the runs in Petrucci's "Rock Discipline" at 132bpm, but now they're down to 120bpm, and not even clean 100% of the time .

So my question is, exercises - yes or no?
Both of course!

The golden mean is the way to live.
Don't tell me what can not be done

Don't tell me what can be done, either.

I love you all no matter what.
I generally take the tougher parts from a song that I want to learn, and turn them into exercises.
(Slightly outdated) Electronic and classical compositions by m'self: Check 'em out
Learn the hardest songs you can find, trust me from experience, I know that a song from say, Necrophagist or Steve Vai will increase your skill MUCH faster and easier than doing mindless exercises and drills. Learn them, take it slow, and think of the song as a huge collection of exercises. Once you finish the song, since there is actually a GOAL to be achieved, the normal speed of the song, you have something to shoot for, whether you plan it or not, and will achieve it faster. And plus, a song has different types of riffs and fingerings, while alot of drills dont really work on everything at once, and it is just more fun to learn a song.
Learning songs is a great way to find weaknesses in your playing. If when learning a song you find a passage to be difficult, stop playing and think about why it's hard for you, then create an exercise that focuses on that particular difficulty.
Someones knowledge of guitar companies spelling determines what amps you can own. Really smart people can own things like Framus because they sound like they might be spelled with a "y" but they aren't.
I never learn songs. I see it as a waste of time. I learn by exercises, I learnt to sweep, shred, tap, bend, hammer on, pull of, learnt all my chords from exercises. Learning songs bore the hell out of me. I can only learn effectively by doing exercises. I only learn songs if I need to perform to people other than that- Exercises.

The important thing is to find what works for you.
Sat in a lab, curing diseases. They actually LET me play with chemicals!