I think there is definitely a place for both. When I'm just rallying I work on my footwork and fitness and try to isolate areas that I need improvement on by doing specific drills. However, I also need practice matches to work on my shot selection, serve and playing strong mentally. I see some people that only want to play matches and there game never evolves. They just don't take the time to work on specific strokes to make themselves more complete players. For me at least, I play my best when I get a even mix of practices and matches.
Please excuse my punctuation and grammar.