Yeah, I am in the "enviable" position of having tried both the initial and the current (2007) version!
The initial version was indeed a joke! I wore it over a tee shirt and into the shower for just 10 minutes (set at moderate output to simulate a downpour) and boy was I soaked!!! My hair was wet, the shoulders and front of my tee shirt was completely soaked, and the back was fairly damp as well. Worst of all, the two hand pockets (all zipped up of course) bloated like two water balloons because water got in fast and furious!
The current version is a lot better -- but not perfect. I "only" got a bit of dampness in the same 10-minute shower test, but at least my hair remained dry so the hood was much improved. The newer version is also an ounce heavier (5.5oz for L) -- presumably from the addition of a second, desperately needed coating of PU.
Unfortunately, we had our driest "wet winter season" early this year, so the only outdoor test I was able to perform was a 20-minute slow walk around the neighborhood in moderate, but continuous rain. I walked v-e-r-y s-l-o-w-l-y to minimize any perspiration. The jacket kept out 100% of the rain.
Separately, I got to test the jacket's breathability when I hiked with it (and a full backpack) for about one and a half hours in Canyonlands (est. 50F) without sweating.
So, in a nutshell, I give the NEW Isotope a passing grade for waterproofness and breathability. I would recommend it for folks wanting to bring a UL rain jacket "just in case", or for "done in a day" type outings. But if you expect long or multi-day downpours, or you want very high breathability, then you should look elsewhere.