Ok, So I have watched most of the how to fly fish videos on Orvis and other websites.  One thing it talked about was fly selection.  It gave a tip to pick up rocks in the water you are fishing to see what kind of bugs are living there to see what the "local food" is.  Makes sense to me.  My "dumb" question is, do people ever take these bugs and put them on a hook and use them as you would a fly?  If yes or no, why or why not?

They generally are too fragile to stay on a hook, and small. The exception would be crayfish and hellgramites, which are Dobson Fly larvae. They are 2-3 inches in length. It is also totally unnecessary  once you realize the nymphs and pupae can be imitated with flies very effectively. Sometimes Rapalas or other minnow baits will outfish the baitfish they're imitating- same goes for flies. When you're on the Salmon River look for small cases attached to rocks made from tiny pieces of sand or twigs. These are the cases of Ryacophila or the green rock worm, which hatches out as a Caddis fly. There's tons in the riffles around Pineville. A fly tied with bright green  abdomen  and a peacock head is good for steelhead in the winter. 
If you open one of those cases you'll find the bright green worm- you'd never get one on a hook to stay, but they are easily imitated. As dumb questions go, yours was not at all.
 
 
 

Actually, in NYS, if you are looking under rocks in a trout stream, it is a violation to use anything you find for bait.  When I last bought a PA license~30 years ago, you could gather up to 50 of any invertebrate per day for personal use for bait.  Conventional methods like running the larva through with the hook point tends to really mess up a lot of these soft critters, but I watched a guy hammer fish in the 900 on Spring Creek in Caledonia once, and when I asked what he was using, he told me leeches that he was digging out of the cress roots.  These are small, no more than 1/4" long.  He had a size 14 fly hook and he was attaching them to the hook with a drop of superglue.  If he couldn't find a leech, he glued on a scud.  But you could get a ticket in NY for it, if a warden happened by!
 
I've always got some green caddis, and some tan caddis, and some orange caddis, in my box when I'm on the SR, and they have worked magic even on kings and browns in the fall when bigger stuff was not working. Fichy is right on with that tip!
 
L13

Little black stones in late winter & early spring. They speckle the snow like black pepper. 

dtrobe-Certain nymphs migrate to slow/shallow water or up on rocks when they are getting ready to hatch.  March Browns, stone flies, Isonychia to name a few.  When they do its a good indicator of what the fish may be feeding on.  The Dobson Fly or Hellgramite actually leaves the stream bed entirely when it molts to the adult stage.    

On overcast, rainy days think olive (the color not the fruit).  Blue winged olives like overcast, damp weather. 

Yep, although they are awesome for bait, hellgramites you find under the rocks on shore they are a no no.  This fly kicks **** in a 10 or 12 and can be tied with green rubber leg  coated in clear nailpolish  and peac0ck hurl.   Quick easy (Thanks for this one Charlie)

Or these

In all my years of stream pounding trout using anything I could find under rocks I never knew it is illegal. Ive used slugs, hellgrammites, crayfish and any other insect I could slide a hook in, funny how some things we think to be harmless are no nos.

troutbum21
Or these

Hey I have a few of those in my box too