That is the grosest and most amusing concept I've heard.

Still, consider that an entire tavern costs about 500 gp, and the average man makes only 1 gp/day. That's why sewers. :)

As for your first question, the answer is that it's a pocket plane that's only open when the bag is 'activated' by being fully opened. If the bag is drawn to, the portal to this pocket plane is closed.

Short, sweet, to the point and 100% correct.

Definitely short and sweet, but missing a few points. Since I'm long-winded, I'll expand upon it. =)

Yes, the opening is pretty much a switch. Open the bag, open the portal. As for air supply, I remember reading (Sage Advice, or even official FAQ?) that the air supply *is* refreshed when the bag is kept open. There is also the line " The only air in the hole is that which enters when the hole is opened." in the portable hole description. If you want to walk around holding the bag open, the air will circulate. Same thing with being in water. Open it underwater and it will fill with water. Leave it shut, the portal isn't open, so water won't "leak" in.

As for the commode option it does raise some interesting possibilities. Maybe not everyone has one, but perhaps they are used in upscale public establishments or in rich people's homes. They would still need to be taken somewhere and emptied from time to time. It also makes me think about the Decanter of Endless Water. I'm guessing it behaves as a mini portal to the plane of water. Make one that links to the plane of air and have it go in reverse. Plane of fire would also work, but be careful you don't burn your bottom. ;) For that matter, maybe there are lower-level mages that are employed by summoning small fire elementals to incinerate refuse.

Don't give me that look for thinking about the engineering behind magical toilets!! :P

And now we get into eberron. :) Nice idea, but too magitech for me. :-D

This reminds me of the first in game magic/technical invention I experienced in an AD&D game. Our Halfling theif had asked the Magic user to cast continual light on a small stone so we could have a light that wouldn't blow out, like our torches seemed to do. Later at a place that required hiding and stealth he stuck the stone in a scroll case. When he opened it we all realized the flashlight had been created. We soon switched to paper for the light since the stone tended to roll out. For the rest of that campaign none of us were without our lights. That DM was awesome. Thanks Harry Tucker where ever you are.

Once in a friends game, a player made the comment of a plumbing system composed of endless amounts of very small water elementals. "It'd be like dropping trou and holding on".

I had a friend once that mentioned plumbing using decanters of endless water.

1) It's not simply a bag with more storage space than is realistic, it's an extra-dimensional planar storage space, thus making it airtight.

2) Relatively cheap if every NPC is at least mid-level, I suppose ...

I'm thinking cheap from a city-planner's standpoint. How much does it cost to build and maintain sewers?

Less than a metropolitan supply of Bags of Holding used as portapotties.

Maybe not in an extremely wealthy, extremely high magic society, though ... twould be an interesting quirk to add, especially if a non-magic using PC travels to the city for the first time and is unaware of the custom.