I recently faced a lot of problems shooting in the rains. A plastic bag doesn't solve the problem as it is the lens that gets wet and if you want to shoot children crossing in the rain or just some rainy scene, its very hard to do that without having some drops right on the camera lens.
To solve this I created a new casing kindof. Which is very easy to make and use. This can be used only for a pro-consumer camera like S3IS , any point and shoot camera or a SLR with at the max 80mm lens not longer than that. There is this plastic bag that normally is used in packing up those T-Shirts which comes in a sales pack. Like 3 rolled T-shirts are put in this plastic bag with a string. The plastic is quite thick. Get a hold of that kind of bag which is enough to accommodate your camera with lens attached to the cam. You should be able to put the camera in and take it out easily.
Now get a hollow tube like structure, more like a pringles container which is like a tube. Now this is something of a size where an S3 IS lens can easily go into. If an SLR see if your lens can pass through it or get something hollow where your lens can get into. Next, put that container vertically on the bag and make a circle with a marker on the bag. Next you probably guessed right,... cut that circle but from the inner side of the markings to make the fitting firm. Once you are done, put the container again on the same spot and glue it with something like feviquick or fevistick. Not the white glue, something that hardens later. You can even use a concrete mixture if you want :P
Once that glue dries up, seal the entire junction with lots of sticking tape , (we call it cello tape in india) dunno what it is called else where. The transparent tape which you normally use for gift wrappings. Nevertheless, slide in your camera from the bag opening and then see that your lens is facing our external hood made of container. Once you are at the right position, you can insert the lens into that hood. Cut the hood size according to your lens size. This will work very well with S3 IS like cameras as well as SLRS. Point and shoot should have a very small length hood. Try to make the hood of a transparent plastic container if you can find one, so that not much of light is blocked from falling on the lenses. Enjoy your Rainy Shoots!
P.S. : I could have put up the pics of what I have created here, but I don't have them on DT.