Yes, the diapers (I'm serious, that's what they're called) are to keep the grease/oil from dripping on riders, but also to keep the brake shavings from falling onto riders. Since Dragon's brakes are above the seats (duh) and the brakes get extremely hot when stopping a train, little bits of the brass can flake off and cause VERY nasty burns.
After it rains, that's why Iron Dragon doesn't open immediately - the crew has to empty out the diapers from all the water/debris that has collected, or else you'll have mud and muck flying everywhere. The water itself won't hurt anything, but passengers typically don't like getting muddy water all over them.
Iron Dragon Crew '98.
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