jenny, i too tried the proactive and although it started out clearing up my blemishes it ended up (after a coupla weeks) giving me the same flaking and dryness that you describe. i stuck it out tho' and it only got worse! all that flaking and such clogged my pores further and my skin started to get extremely sensitive to the benzoyl peroxide. back to dermatologist! i'm on accutane now and it's no treat, i'll tellya, but supposedly it's a long-term solution. i'd suggest talking to a derm and see what he/she has to say. it made a huge difference for me. good luck! and the proactive has a money-back gaurantee too, get yer dough back girl!
ps- i also tried the murad acne complex kit and am still trying to recover from the effects of that, four months later. and it stung too. money back.