The dynamics and interactions of edge dislocations in a nearly aligned sheared lamellar mesophase is analysed to provide insights into the relationship between disorder and rheology. First, the mesoscale permeation and momentum equations for the displacement field in the presence of external forces are derived from the model H equations for the concentration and momentum field. The secondary flow generated due to the mean shear around an isolated defect is calculated, and the excess viscosity due to the presence of the defect is determined from the excess energy dissipation due to the secondary flow. The excess viscosity for an isolated defect is found to increase with system size in the cross-stream direction as L(3/2) for an isolated defect, though this divergence is cut-off due to interactions in a defect suspension. As the defects are sheared past each other due to the mean flow, the Peach-Koehler force due to elastic interaction between pairs of defects is found to cause no net displacement relative to each other as they approach from large separation to the distance of closest approach. The equivalent force due to viscous interactions is found to increase the separation for defects of opposite sign, and decrease the separation for defects of same sign. During defect interactions, we find that there is no buckling instability due to dilation of layers for systems of realistic size. However, there is another mechanism, which is the velocity difference generated across a slightly deformed bilayer due to the mean shear, which could result in the creation of new defects.