Illiteracy...?

Absolutely. Illiterate has more than one definition. Its primary definition is the one you quoted, but it also means being ignorant or unknowledgeable in a particular subject or field: For instance...I am literate in calligraphy, but only passingly familiar with auto mechanics. If I were to speak to someone about autos, and try to bluff my way through using the VERY little that I know, it would be absolutely correct for that person to call my bluff and call m illiterate.Just because it has a negative connotation in our society does not mean it is an insult to use in this way.

I think that the term illiterate can be used for people who are able to read and write, but who are ignorant. I suppose it could also apply to someone who's just not "with it" or very informed.

yes and no. yes in the sense that people who are literate are "blinded" by the words of others and sometimes this can be good or bad. people who are illiterate use their own eyes and whatever they can hear to form their image of the world. though in this day and age, you don't have to be literate to absorb the influences of television.

In my book, people who acquire knowledge through their hearts are more literate than the ones that acquire knowledge through books.