We have waterproof panniers and keep stuff packed seperately in the panniers in waterproof bags, to avoid any contamination between wet and dry stuff. We generally have a day pannier and an evening pannier - wet cycling stuff, if applicable goes back into the day pannier and nowhere near the evening pannier. Sleeping bags and sleeping mats are also in waterproof bags.
As far as the tent goes, we keep the inner and outer in seperate waterproof bags, so the inner stays dry. We pitch outer first so that when it's raining the inner stays completely dry when pitching. If the outer has got wet and we then get a decent bit of weather we will stop at the side of the road to dry it - usually suspending it between trees or something like that. Like others have said our tent - a 2 man - is big enough to cook in the porch and it also holds two people comfortably if it's too wet to do anything outside.
On the bike, if it is really wet and there is not much chance of drying off when riding I am usually hermetically sealed in goretex (!) ie jacket, trousers, overshoes, with waterproof socks, waterproof gloves and a waterproof/windproof beanie under my helmet. Bus stops, under bridges etc etc are great places to cook lunch and to get a bit of shelter.
Basically you can deal with it, but after a few days I admit it gets tiresome. I completed my LEJOG during the wettest August on record - 10 out of 14 days it rained. Luckily it was warm enough not to require full waterproofs, and we got used to the constant soakings, but we were lucky enough to have B&B or hostel accommodation every night. If we were camping I would have been really hacked off.