As for learning the theory, this site has helped me alot. It has everything you need to know to go from 0, to a highly functional level
In later classes we used this book, which I see in the bookshelves of my coworkers: http://www.amazon.com/Microelectronic-Circuits-Electrical-Co...
If you want to learn more basic concepts, I'd recommend looking perhaps for a class in your area to audit, or possibly mit ocw might have something.
I will say the following though:
1) many folks in industry get to a point to where they rarely, if not never sit down on paper and do node-voltage analysis. They eventually get a conceptual "feel" for everything and work in simulation environments (matlab, spice, etc.). The best way to get here is to do the conceptual exercises on paper first, then play with a simulator afterwards.
2) designing basic analog circuits can be learned from textbooks, but doing more "active" things like building a switching power supply requires more specific books.
This is what you need. There's various 100-in-one or 500-in-one kits, you get a big bag of parts some instructions and you can start making all kinds of cool things. Also great if you have kids.
If want to know fundamental electronics, start with one of those corny radio shack kits where springs hold the wires in place.
For microcontrollers, I like NerdKits more than the other stuff out there. The LCD display gives you a lot more feedback than assembling some other kit, and finding out you can only make two LEDs blink.
for example, I don't know how to build a circuit that would plug into a headphone jack and switch a light on and off based on the volume level...
I also don't know how to build a simple audio amplifier, timer, etc.
Do you recommend any specific kit based on the above? I mean, I could read instructions and hook components together but I want to be able to build novel circuits that I dream up.
http://www.ibiblio.org/kuphaldt/electricCircuits/
Horowitz & Hill's "The Art of Electronics" is also excellent, but more expensive.
I have been told there are some good introduction to electronics manuals published by the Navy through the US Government Printing Office, but I have looked at them myself. If you happen to run across one of those you might check it out.
<plug>I'm starting an online store for hardware hackers in the UK - http://laughingcomputer.com. There's a lot of good stuff out there which is not easily available in the UK. I'd love to fix that and get more people into hardware hacking.</plug>