Dragging this one up from the depths...
I do the lycra thing - once you do, you can't go back. My wife rides to work too, and once I finally convinced her to buy a pair of knicks and a jersey, she was hooked, and spent a lot of money on more gear.
Apart from the comfort issue, I find that regular clothes get trashed pretty quickly when you're riding to work every day wearing a backpack.
Oh, and yes to helmets, but everyone wears helmets here.