My wife and I have seen dramatic improvements in our skin quality.
To really see dramatic result you need to strictly follow paleo AND be aware of what you're putting on your skin as well. We use all natural soaps. Beef tallow soap from US Wellness is AWESOME!
Increase fat intake has REALLY helped with dry skin. We used to use lotion all the time. Eating paleo we've completely cut it out.
My acne and shiny skin dissappeared when I went paleo. Not sure about dry skin, since that never has been an issue for me. But I think skin health in general will be better on paleo, also dry skin. I also recomend to just wash face with water, nothing else.
My skin became much softer and a little more oily when I went paleo. I shave my head, and my coworkers like to grab/rub my head "for good luck" After about 2 weeks of paleo, they started asking me if I had just put lotion on my head, or what kind of lotion I was using because my skin was so soft. I also saw a reduction in razor burn on my scalp / face.
Paleo definitely provided benefits as far as less acne outbreaks with the absence of sugars in my diet. Also, just using minimal body soap (none on arms/legs/chest/face) quickly cleared up all dry skin areas i had
I've definitely noticed better hair and skin. My hair started growing faster and has more body and does not get greasy as easy. I used to get occasional minor skin issues (dry / itchy skin, cracks, etc) and haven't had any of that since I went strict Paleo, though this also coincides with it getting a lot more humid recently, so that might also be a cause. I have also started taking vitamin D, first 600IU and now 5000IU, that might have some effect.
I had one spot on my ankle that had been dry and scaly for years, and the other day I noticed that it was completely gone, kind of strange.
Edit: interesting, I have always had minor keratosis pilaris on the backs of my upper arms. I don't usually think about it because I don't see it. I just checked and it seems to be gone?! I've had it ever since I was a kid (over 30 years).
Not sure if this is the Paleo diet or the vitamin D (only two significant changes recently), but wow!
I realize people are different and in different environments, but if possible, I think it's better to prevent the dryness rather than trying to fix it after the fact using topical lotions, etc.
I personally seem to be having less dry, cracked skin in this Midwest winter, by eating more fatty meat and avocados. I've also been using only soaps made of saponified oils rather than the harsh detergents. (By the way, this is an interesting video about real vs fake soap: http://www.youtube.com/watch?v=-6E19OUBNhM)
My hands still get rough sometimes, because I have to wash with hard water. But it's nothing like what it was. Before, when I was mostly eating leaner meats, the skin of my fingers near the fingernail would get so dry that it would start splitting and getting all red and slightly painful. Sometimes it would get so bad enough that it bled. I've been on higher fat about 1-2 months and even after a shower, my skin hasn't cracked.
As for soaps, I use Dr. Bronner's and Trader Joe's oats and honey.