You can argue wattage all you want, but dynamo systems with halogen lamps are plenty bright for both being seen and illuminating the road. I could show you a 15 watt tube audio amplifier that would knock the socks off a solid state unit ostensibly rated at 10 times the wattage.

Drag is noticeable with some dynamos but not that significant unless perhaps you are racing; it's less with a hub system than a sidewall tire drive (although there are several low drag sidewall dynamos on the market now, including the B&M S6 and the Swiss-made Lightspin).

Dynamo fact and fiction: http://www.myra-simon.com/bike/dynamos.html
Comparison of dynamo performance: http://www.myra-simon.com/bike/dynotest.html
Schmidt hub review: http://www.myra-simon.com/bike/schmidt.html