Perhaps the energy we see being unleashed during regeneration is the Time Lords' actual form, kind of like the 'genie in the bottle' - the physical body is merely a vessel to allow interaction with the four more mundane dimensions of reality, whilst the energy form operates in the higher dimensions. Remember how Rassilon and the High Council in The End of Time readily planned to shuck their physical forms and ascend to a higher plane as beings of pure energy; maybe in evolutionary terms this is something the Time Lords should have done long ago, but due to the stultifying nature of their society, their development has been arrested.