The "guessing at unknown readings" is a problem, and why it's a good thing to read things with lots of familiar vocabulary and read things that have furigana on the kanji. The main principle of extensive reading isn't "read a whole lot," it's "read things that are easy SO THAT you can read a whole lot."
The ReadMod website has some good 多読 related research and resources, but I'll throw my own two cents in because extensive reading is one of those things that I refuse to shut up about.
1. For learning vocabulary, there are times when you can encounter a new word and guess it from context. But I don't think that can be relied upon, especially with Japanese where you can learn the kanji and still not learn the correct reading. However, through extensive reading, you might see a word you already *sort of* know another 10 or 15 times, and then you start to know it better, and you start to get a feel for what kinds of contexts you can use it in, and the knowledge you get is more solid and versatile than if you put the same words in your SRS and saw it 10 or 15 times in a single example sentence.
2. There are lots of things that are involved in reading besides vocabulary. Things like:
-Reading kana quickly and fluently
-Solidifying grammatical knowledge
Even if you understand a grammatical concept, how long does it take before you really have an intuitive understanding of it? You don't need to see it ten times, you need to see it a thousand times, and in different contexts.
-Developing strategies for reading when you don't understand every word.
Normally, I read extensively because I want to, but last year I had to read 女工哀史 for research for a novel I was writing. And I had to read it FAST. This is a 400-page book about working conditions in textile mills, first published in 1925. I would never have had the time to look up every word I didn't know. But thanks to a lot of extensive reading, I was able to read it quickly and still get the information I needed to get.
3. Motivation
I think I'm like a lot of learners of Japanese in that I started learning because I was interested in anime and manga, even though these days I'm more interested in novels. I think being able to read long stretches of texts in a single sitting is one of the things that transforms reading from "studying" or "homework" into "that fun thing I'm going to do so that I can find out what happens next!" I think there was a real shift in my attitude when I realized that I was reading ノルウェイの森 and I was understanding (a chunk of) what was going on and I cared about what happened next, and... it would have taken me years longer to get to that point if I cared about looking up every single word I didn't understand.
Obviously there are a lot of gradations between 100% extensive reading with no dictionary use ever and 100% intensive reading making sure you understand every single thing, and I think it's useful to spend time at different places on the spectrum. But extensive reading is worth trying, in my opinion, and there's a lot of good research supporting it.