Do merino wool base layers need to be skin tight?
I am also wearing a waterproof jacket over it which isn't very breathable


Well there's your problem. 

The most wickable, breathable material in the world isn't going to achieve those properties if you put a plastic bag over it. If you don't want to be caught out in the rain, keep the raincoat in a backpack/messengerbag/pannier/whatever until it's needed.

Regarding how tight the base layer should be, I would say it should be pretty tight, especially when you first put it on because it will shrink up in the wash and loosen up considerably when you sweat in it. However, if it's a little baggy it's not the end of the world, it just wont wick moisture away as well.

Also keep in mind that everyone has different heat/cold tolerances. Two different people may require entirely different layers at the same temperature based on exertion, weight, preference, etc. If you're a hot blooded type, it might need to get a little colder before you put on a wool jersey. I know I'd catch on fire for anything above around 55&deg;F