Panniers
A cheap solution to protect the contents of your panniers is to use trash compactor bags inside your panniers. I use a pair of Nashbar ATB panniers that are only water resistant, and the compactor bags keep everything nice and dry.

Helmet
I concur: Wear a helmet. I use a bandana under my helmet most of the year unless it is cold enough for a balaclava. It keeps my helmet from getting helmet stink. I change it every few days, more in the summer. If you are riding in a cold rain, use clear packing tape to cover the vents in the helmet--your head will be much warmer!