Yeah its because drag isnt simulated properly yet - tanks behind other tanks all add to drag the way they wouldnt in real life. So it actually makes it easier to do a wide rocket than a tall one unlike reality. But they will no doubt sort that.
For the moment though you cant beat 'asparagus staging' to efficiently get into orbit with big rockets. You need to use liquid fuel tanks as boosters not solid rockets, and you link them in such a way that the fuel is flowing from the first to the second and so on so as they are jettisoned your rocket is getting lighter whilst having less engine power but still lots of fuel - but the atmosphere is also getting thinner as you get higher so you have the thrust to get off the ground but the fuel to keep going longer. Look for it on google.
To find out how much fuel you need to get anywhere you really need the Engineer Redux mod which tells you what your DeltaV and TWR (thrust to weight) ratio is for each stage and the total for your rocket. Then you use the DeltaV map to plan your fuel for the journey (I usually add 1000 on top of these figures as I am very inefficient):
http://www.skyrender.net/lp/ksp/system_map.png
Make sure you always have at least 1.4 TWR for launch, which is the power of your engines, anything less wont get you off the ground fast enough. Also ensure you have a TWR of around 2, preferably 3 or 4, for in space engine stages unless you want to be waiting for ages to carry out each burn.
And my last hint is that if you aerobrake when you come back to Kerbin you can reenter the atmophere with no fuel use at all. Plan to go skim around the atmosphere at around 30km, rather than hit the planet directly. It may take you two goes around but you can get back safely to ground with no fuel use. And when they introduce damage due to excess heat of reentry this will be the way to do it!
Its a detailed game, but flaming addictive, and you learn loads about space travel and rocket design into the bargain. I am loving it.
Thanks muchly for this Nats, I did read that I needed some mods but all the links were to the forums (which were down whenever I checked). I'll play some more tonight