We present a schematic model for the formation of baryonic galactic ha
los and hot gas in the Local Group and the intergalactic medium. We fo
llow the dynamics, chemical evolution, heat flow, and gas flows of a h
ierarchy of scales, including protogalactic clouds, galactic halos, an
d the Local Group itself. Within this hierarchy the Galaxy is built up
via mergers of protogalactic fragments. Hot and cold gas components a
re distinguished, with star formation occurring in cold molecular clou
d cores, while stellar winds, supernovae, and mergers convert cold gas
into a hot intercloud medium. We find that early bursts of star forma
tion lead to a large population of remnants (mostly white dwarfs) that
would presently reside in the halo and contribute to the dark compone
nt observed in the microlensing experiments. The starbursts and merger
s heat the gas and lead to powerful evaporation-driven winds. This out
flow is crucial, as it drives gas out of the clouds and eventually int
o the intergalactic medium. The model thus suggests that most microlen
sing objects could be white dwarfs (m similar to 0.5 M-circle dot), wh
ich comprise a significant fraction of the halo mass. Furthermore, the
Local Group could have a component of metal-rich hot gas similar to,
although less than, that observed in larger clusters. We discuss the k
nown constraints on such a scenario and show that all local observatio
ns can be satisfied with present data in this model. The most stringen
t constraint comes from the metallicity distribution in the halo. The
best-fit model has a halo that is 40% baryonic, with an upper limit of
77%. Our model predicts that the hot intragroup gas has a total lumin
osity 1.5 x 10(40) ergs(-1) and a temperature of 0.26 keV, just at the
margin of detectability. Improved X-ray data could provide a key cons
traint on any remnant component in the halo.