Go for the creamiest foundation you can find - not liquid or one of those cream-to-powder things. Everyone is different but the best one I've found so far is Bobby Brown Foundation Stick. It looks like a pan stick but if you just put it on the bits that need it and then blend it in it's quite sheer, though you can build it up. They even have a powder which doesn't dry my skin out, which is unheard of. (Sheer Finish Pressed Powder).
Dry and sensitive are two distinct problems - I would work on the sensitivity issue first. What makes your skin react badly? It could be an allergy, or simply the fact that the skin is aggravated and needs 'calming'. Look for a skin-care system that is meant to calm and soothe the skin - it will probably also help with the dryness.
Once you've conquered the sensitivity, then add one product (moisturizer, perhaps) that is designed for dry skin. Use it every other day or every two days to determine if it will set off a reaction, and if all is okay, then increase usage.
Make sure you moisturise every day before you put your make up on and every night before you go to bed. Aqueous cream is a really good moisturise, you can buy it over the chemist in most pharmacies, its actually what the doctors prescribe. Once a week try using a moisturising face mask and also remember to exfoliate.
have found the Avene range from large Boots stores very effective for my dry, sensitive skin. They sell many types of moisturisers as well as some make-up.
First things first: make sure your skin is in good condition. Moisturize (Espa is great for those who can afford it, otherwise Neal's Yard has the Rose and Mallow cream), put on a primer with a good dose of SPF. A moisturizing mask twice a week helps (LUSH has a brilliant, fresh-made one - Crash Course in Skincare). Use a gentle scrub on your face, as anything with harsher, bigger 'beads' will most likely harm your dry skin in the long run.
As for the right foundation, it's always better to ask a salesperson at the beauty counter. Just make sure to emphasize that you want something for DRY skin, as they sometimes try to sell you a load of crap that doesn't help. Bobbi Brown has a good liquid foundation for dry skin. Also, try applying it with a foundation brush, as this makes it go on smoother.
Moisturise and use a foundation primer. GOSH has produced a fantastically silky primer at £13, which is cheap for a primer and it lasts forever. Also use mineral foundation, as others tend to show up your dry skin. Good luck! :)