The problem is the DSLR itself, not how you carry it.
A DSLR screams "camera." People will see it from a block away, they have the search image down. The things are big, bulky, heavy, overcomplicated, and flashy. Add a fast zoom lens and it gets even bigger and heavier and more obvious. And if by some chance they miss it visually, they'll hear it. The shutter and mirror slap are loud enough, but add the motor drive and it's pretty hard to miss.
There's an answer, and it's nothing new. There's a reason street photographers have been carrying Leica's since before most of us were born. They're whisper quiet, they're small enough to fit in a jacket pocket, and today, to anyone but an expert, they read as a point and shoot from a distance. So people ignore them.
If you don't want to spend the big bucks for an M8, the next best thing is probably a cheap digital point and shoot. The drawback, of course, is the shutter lag on less expensive digital cameras. Try to capture the moment, and the moment is gone by the time the camera catches up with your finger. But there are a fair number of people using things like the Canon G10 for street photography.
I really lusted after a Leica M8 with 35mm or 28mm.
After researching prices, availability, service turnaround time and alike very carefully, I bought a Nikon D3 + 85 1.4 + 50 1.4 AF-S for the same money, I could have got only the Leica body.
Putting the Leica lenses on top equals to a few excellent additional Nikon zooms. I could have gone also for some less expensive Zeiss or Voigtlaender lenses, which equals only to one or two Nikon primes.
The Leica prices are far out of control. Technical capabilities of the pro grade Nikon (or Canon, Sony, Pentax, Olympus, ... for that matter) gear are way beyond the boarder, a current Leica digital can go.
Lately, I shot for 2 1/2 hours exposed in the rain of the Chinese F1 GP (shortly some photos of the race itself on
my website here).
A Leica M8 would not even go that far (I am talking focal length here), nor would I trust the unsealed body for good reason.
I really like Leica (especially the timeless M-System), the prices and usability compared to other camera makers make them not very favourable to me though.
The bulk, noise and flashy factor, you describe are slightly overrated to me.
As can be seen on some galleries on my website, I do some amateur street shooting (Hong Kong 2009, being the first outing of my then new D3 as a second body).
It is all a matter, on how you behave and move on the street. You don't need to act indiscrete or impolite with an SLR.