"How is layering/wicking supposed to work - where should the moisture go?"
Wicking is vastly over-rated IMO.I rely on ventilation/evaporation to control moisture.
"Should all the layers be breathable?"
Again, IMO unless it is insanely cold (and 35° F does not fall into the CampyBob Cycling Institute 'Insanely MF Cold!' calibrated thermal range) I use all breathable layers.
I 'might' use a wind shell light jacket if the wind speed is in the 20-25 MPH range and the temperature is in the low thirties. The constant climbing in my 'hood keeps the sweat levels up for even light tempo workouts, so I dress lighter and work harder to stay warm.
Stopping to fix a flat can be a cold [censored].
"Or should I aim to feel a bit colder and not sweat that much?"
That's what I try to do. That, and limit workout lengths when it gets really cold. My toes tend to determine ride duration anyways. Does your jacket have adjustable vents? You might try running the front zipper down a bit and opening up the underarm vents if it has them. Personally, my jackets only go on when it's below freezing (and/or stupid windy). Everyone reacts differently to air temp, humidity, workout intensity, etc.
You say you weren't cold, just wet...maybe you were just a bit too insulated or under-ventilated? Play around and find the happy medium on comfort and keep a record of what works in your log book.