A couple of comments on Diane's post:
First of all, stuff sacks are different from dry bags in that the closure on stuff sacks isn't waterproof. Dump a full stuff sack into your bathtub (put a towel in it) and you'll see what I mean. There is no way you can get that drawcord closure tight enough!
Second, the Sea-to-Summit Ultra Sil dry bags that got such a bad rap in Jim Woods' excellent 2006 article and also in a BPL review at about the same time have improved. I bought a small one the summer of 2008 and tested it by turning it inside out and putting water in it (same test as in Jim Woods' article). It worked fine, no leakage either at the seams or through pores in the fabric!
In the meantime, I was very unhappy using trash compactor bags as pack liners. First of all, my original box of trash compactor bags was gone and I could not find a brand that wasn't scented. I was concerned about the scent in bear country. I also found the scent repugnant. Second, I was getting sick and tired of shoving small items down into a small cavities in my pack and having them pop right back out at me thanks to the slippery plastic liner. Your mileage may vary, of course, and, if you want to use plastic bags, I also recommend contractor bags instead of trash compactor bags to avoid the scent issue.
Since I wanted to dispense with the slippery plastic liner, I bought two more Sea-to-Summit Ultra Sil dry bags, one for my sleeping bag and one for my carried clothing. I of course tested them before using and continue to test them yearly. Later that summer I slipped and fell during a difficult stream ford. When I crawled out and emptied out my pack, I found several inches of water in the bottom of the pack where my sleeping bag in its dry bag was. Not a drop of water got into my sleeping bag!
I recently bought Cuben fiber dry bags for my sleeping bag and carried clothing. They are about half the weight of the Sea-to-Summit Ultra Sil dry bags. However, Cuben is more sensitive to abrasion. I therefore plan to handle the Cuben dry bags very carefully and also to check them frequently for possible holes (a good idea with anything you rely on to keep out water).
I also use a pack cover, because I use my pack as a pillow and want to keep the outside of the pack dry. I don't count on it to keep the contents of my pack dry, though--in addition to my little soaking in the stream, I have had rain water run down between the pack and me and soak the back of the pack. I carry my tent in one of the outside pockets (it also could go at the top of the pack, but needs something waterproof around it so it won't get the inside of the pack wet). That way when I stop for the night and it's raining, I can set up the tent while the rest of my pack stays dry. Once the tent is up, the pack goes inside (I remove the cover in the vestibule), I sit in the doorway to remove my rain jacket and then unpack the pack inside the tent. I do this in reverse when packing up in the morning--everything is packed inside the tent, the pack cover goes back on. The pack goes outside while I wipe the tent floor. I then get into my rain jacket in the doorway and back out. I then take down the tent, pack it and then hit the trail.
If it's not too cold or windy, synthetic fabrics will dry on your body really fast while you are moving. In fact, if it's relatively warm, I'll leave off the rain jacket while I'm hiking and just get wet. When the rain stops, my base layer top (which I wear as a hiking shirt) and supplex nylon pants will dry in about 10 minutes while I'm moving. I actually get no wetter than I would while sweating inside the rain jacket! Of course, when I stop, on goes the rain jacket with an insulating layer underneath. If the clothes are wet at bedtime, they go in my sleeping bag but inside a plastic ziplock bag. They will still be wet in the morning, but at least they'll be warm! EDIT, LATER: Please note this is for relatively warm weather--say mid 50's F and above!
BPL has several excellent articles on coping with wet, cold rain conditions. I strongly recommend you read them!