Wool is my second favorite material for being in the rain in. First is leather, but wool is second and I'll take it over any synthetic material.

Best thing to remember is what wool is for, which is keeping sheep warm. Now, sheep generaly dont have houses to go into when it rains, so they get wet. Their wool must keep them warm, even when soaked, and it does this well. Thats why kilts are made of wool, and why fishermen wear wooly jumpers. As James said, its the way you dry it that makes it shrink.

If you have a wool kilt, you can confidently wear it no matter how hard it rains, and even when wet, it will keep you warm!