i use a shimano dynohub, the 3n71 model:
http://www.peterwhitecycles.com/Shimano3N70.asp
it's relatively heavy (new 3n80 model is much lighter), but the drag is minimal, and it costs about $90, compared to $200(?) for the lighter schmidt dyno. i run it 24/7, and even for extended rides like brevets (200-600k). it probably slows me down a tiny bit, but my commute/known rides are about the same times they used to be.
i run an E6 halogen lamp in front, and a rear LED wired to the dynohub as well. the
rear light has a standlight, and stays lit for about 5 minutes after stopping. i don't mind the front light going out when stopping.
the E6 casts an amazing beam of light in complete darkness, just about as far up the road as you can see! it directs the light in a rectangle of sorts on the ground, about 4-6 feet wide. some might not like that, but i think it keeps the light where you really need it. for urban riding it doesn't really show up on the ground under street lights, but definitely is enough to catch someone's eye.
hub dynos are definitely worth checking out!