For short trips (like commuting) when it's reasonably warm, the best way to stay dry from outside and inside is the poncho (aka cape) specifically designed for bike use. They have loops for your thumbs and a strap that ties around your waist.

Yes, they add drag -- I would not attempt to break the hour record while wearing one. But I do not have any particular problem with side winds while wearing one.

You have to have fenders for capes to do you any good. If you resist this practical feature, you need full rain gear -- pants and jacket.

http://www.bicycleclothing.com/Rain-Capes.html
This is the one I have: http://www.campmor.com/webapp/wcs/st...roductId=10130
http://www.peterwhitecycles.com/carradice.asp (scroll way down)

There is no way for me to keep dry from sweat wearing a water proof jacket unless it's below about 40F. And breathable fabrics don't help that much in the rain, because they can't breathe when they are wet.