Yeah, the ballooning, flapping parachute effect would be really annoying with baggy pants. And I don't want to even think about the possibility of scooping up bees/wasps/etc while cycling along!
To begin with I'll probably just wear the cycling nix I already have, though the chamois will be a bit superfluous. Running/climbing/triathlon/rowing gear would work well, same snug fitting technical fabrics but without the bulky pads.
That's what I've being doing, using my normal bike nix - in fact just bought another pair, courtesy of Cellbikes (thanks for the tip, mikebytes). $25 delivered to the door.
Speaking of baggy pants, I had an interesting experience while flying a sailplane a few years ago. Here's what I wrote at the time. Excuse the excursion off topic.
It had been quite a while since I had last flown a single seater sailplane, so as I gave the signal to takeoff last Saturday, I was looking forward to revisiting that crisp responsiveness. I was seated in the LS6, a thoroughbred racing class glider that I had last flown back in January. Conditions were good, although there was a quite brisk northerly wind blowing straight down the strip. With the LS6, the takeoff roll begins with the flaps in reflex (negative) setting, but as soon as the ailerons become responsive, the flaps need to be pulled back to the standard (positive) takeoff setting. As there was quite a bit of wind, I pulled the flaps back the required two notches almost straight away, and then quickly returned my left hand to its normal position, hovering over the release knob. The glider seemed reluctant to lift off, and I realised that the flaps had slipped back a notch to the zero setting. I quickly pulled them back, and the glider, now with plenty of airspeed, responded by leaping into the air. Yow - stick forward and stabilise just off the ground. We hovered in station for a second, then the flap lever slipped again, this time all way back to the reflex setting. The glider faithfully followed by lowering its nose and plunging back down towards the ground. Sheeeit - I grabbed the flap lever and pulled back, and the glider, ever obedient, leapt back into the air. Phew - but now I had a non latched flap lever that I had to hold on to with my left hand while I flew the glider with my right hand. The slightest movement of either hand produced an instantaneous change in attitude and altitude. I felt like a juggler trying to keep all his oranges in the air - and the glider was porpoising all over the place. I couldn't see what was wrong with the flap lever, so wedged my left hand against the side of the glider with my knee to stop the flaps moving. The glider settled down and the rest of the tow proceeded normally.
After release, and with plenty of height and room, I turned my attention to the recalcitrant lever. I noticed that every time I moved the lever, my left trouser leg followed. Very curious. It seemed that the tang on the flap lever had somehow snagged on my baggy-trendy cargo pants. A little bit of ferreting around and they popped free and everything returned to normal.
Dangerous things, those baggy cargo pants.