Kant's theoretical-practical distinction is not a Kantian innovation, but was customary at the time (and has been ever since in German speaking philosophy).
It is directly formed after Aristoteles distinction between practical wisdom (φρόνησις), and theoretical wisdom (σοφία) (e.g. in Nicomachean Ethics).
The various modes of reason inform also his systematics of the sciences: theoretical (θεωρία), practical (πρᾶξις) and productive (ποίησις) knowledge.
As the relevant SEP entry on Aristotle states:
The theoretical sciences include prominently what Aristotle calls first philosophy, or metaphysics as we now call it, but also mathematics, and physics, or natural philosophy. Physics studies the natural universe as a whole, and tends in Aristotle's hands to concentrate on conceptual puzzles pertaining to nature rather than on empirical research; but it reaches further, so that it includes also a theory of causal explanation and finally even a proof of an unmoved mover thought to be the first and final cause of all motion. Many of the puzzles of primary concern to Aristotle have proven perennially attractive to philosophers, mathematicians, and theoretically inclined natural scientists.
Practical sciences are less contentious, at least as regards their range. These deal with conduct and action, both individual and societal. Practical science thus contrasts with theoretical science, which seeks knowledge for its own sake, and, less obviously, with the productive sciences, which deal with the creation of products external to sciences themselves. Both politics and ethics fall under this branch.
Finally, then, the productive sciences are mainly crafts aimed at the production of artefacts, or of human productions more broadly construed. The productive sciences include, among others, ship-building, agriculture, and medicine, but also the arts of music, theatre, and dance. Another form of productive science is rhetoric, which treats the principles of speech-making appropriate to various forensic and persuasive settings, including centrally political assemblies.
Or is it that Kant views practical reason, or ethics, the basis by which one acts in the world; (even whilst he demands 'the moral law' as a pure aspect of inner being); as opposed to interpreting it, which is his pure critique?
It is important to note that "pure" is not a synonym for "theoretical".
Kant uses two orthogonal distinctions:
- theoretical (theoretisch) and practical (*praktisch)
- pure (rein) and applied/empirical (angewandt/empirisch)
Kant distinguishes between theoretical and practical reason. But those two types of reasons are "ultimately one and the same reason which has to be distinguished simply in its applications".1 Those reasons can, further, be "pure" or "applied". As a first approximation, this distinction can be understood in analogy to the a priori/a posteriori distinction. (Be aware that Kant branches these distinctions the other way around too: there is pure and non-pure reason, which can be uses in a theoretical and in a practical way.)
So, Kant's critique of pure reason is, in fact, a critique of pure theoretical reason.
And he starts his preface in the Critique of practical reason explicitly addressing his title:
This work is called the Critique of Practical Reason, not of the pure practical reason, although its parallelism with the speculative critique would seem to require the latter term. The reason of this appears sufficiently from the treatise itself. Its business is to show that there is pure practical reason, and for this purpose it criticizes the entire practical faculty of reason. If it succeeds in this, it has no need to criticize the pure faculty itself in order to see whether reason in making such a claim does not presumptuously overstep itself (as is the case with the speculative reason). For if, as pure reason, it is actually practical, it proves its own reality and that of its concepts by fact, and all disputation against the possibility of its being real is futile.
Kant's Die Metaphysik der Sitten (The Metaphysics of Morals, 1797), on the other side, is concerned with applied or empirical practical reason, which includes virtues and vices, foundations of law and politics.
1 "… am Ende nur eine und dieselbe Vernunft…, die bloß in der Anwendung unterschieden sein muß" (Grundleg. zur Met. d. Sitt., Vorr., p. 19).