In the American midwest we have storms that look just like that. But they're turned the other way.
But, more seriously....
You're right in thinking that you want to water seal that engine. A dab of RTV silicone where the magneto wires come out is a good idea. Plus the gaskets.
What I do is take the stock gaskets out and throw them away. Then I mimic the gaskets using a narrow bead of silicone. Do the clutch cover as well as the magneto. Water in the clutch is no good.
I haven't found that my bike itself needs any more weather-proofing than that. And I ride in all but the worst storms.
As for weatherproofing yourself, there's always the cheap rainsuit. Or if you want to spend a bit more, then you can get a set of bibs that has actual working pockets, which does come in handy.
I've found that $20 motorcycle boot covers keep my feet in good shape.
For your hands, the best solution I've found is bar mitts. Here's the ones that I made.
Cheap and easy. And dry, warm hands helps an awful lot.
Here's another link to a thread of mine. In the first post, you'll find a photo and description of how I made a weatherproof cold weather helmet.
These things can be done pretty easy. And I can ride in some pretty heavy and cold rains with only minor inconvenience and no real discomfort.