sparkle25, the first time I henna'd, I had the same experience with dryness. I read through pages and pages of posts about henna and I even went to the Henna for Hair website and read all that I could there. I mixed the henna as Henna for Hair recommended with water and lemon juice and let it sit overnight for color release. I applied it to my freshly washed, unconditioned hair and wound up with straw on my head that took two weeks to get back to normal.
Fast forward a year or two later to my "new" henna routine. (I've been using this "new" routine for about 4 years now.) I bought Nupur Mehendi from my local Indian grocer. I mix my henna with 1 cup of V05 Moisture Milk conditioner, 1 Tbs. of wheat germ oil and 1 cup of hot water with 6-8 Lipton Tea Bags added. (I like the deeper color the tea adds to my hair). I put my hair in 8 to 10 braids and apply this mix to dirty braided hair. I wrap my head with plastic wrap, then I apply a plastic shower cap or a plastic bag and let it sit for 2-3 hours.
When it is time to rinse, I fill my kitchen sink with warm water and dunk my head in the water. I use a disposable cup to help rinse the henna out (which comes out quickly and easily because of the conditioner and the fact that my hair is braided). Once my hair is sufficiently rinsed in the sink, I get in the shower and un-braid, shampoo and condition each section separately. When I am done, I have soft, shiny, well moisturized hair with a color that resembles the dark tea, rather than the normal red that henna leaves behind.
The added benefit of the braids--no little bits of henna, tangles and/or knots to deal with upon completion.
The few extra steps I take at the beginning of a henna, save me hours of frustration in DC's and detangling later.