I think hooded bath towels for babies are super cute, but they're expensive and can be too big for a wet, squirmy little body. Ages ago, someone had given me a microfiber hair towel as a stocking stuffer and it was sitting in the back of our linen closet. I never once used it for my hair but it works extremely well as a baby towel.
It's easy to cover the top of the baby's head quickly with the towel and it is the perfect length for a baby's body. (When we first started using it to dry him off, it reached almost to his feet and now it only covers a bit past his bottom. At both lengths it's long enough, without being too long.) Because it's microfiber, it dries him very quickly, which helps to keep him from getting too cold. We often use a hand towel to dry off the front of his body.
Turbie Towel or Turbie Twist are the brand name of the product to which I'm referring, and they sell for like $5, but I've seen generic versions at the dollar store as well for just a buck. Either way, they are much less expensive than actual hooded baby bath towels and I'd say slightly more effective since the baby doesn't get all tangled up in it.