So it sounds to me like it's:
Kill a dragon = increase your progress toward earning the ability to learn another shout.
Find dragon script on a wall somewhere = learn a word, but you can't learn a complete shout until you've killed sufficient dragons.
I could be wrong, but that's what it's sounding like to me.
I think this is AWESOME. The only concern I have is that it will overshadow magic in the game. But as long as the shouts do things that no magic effect in the game can do (such as slow time,) then I think it should work out. Magic will still be necessary and useful, but the dragon shouts will do things magic can't. That's my hope, at least.