http://www.rockpapershotgun.com/images/july08/tq.jpg
Of course the bag should be visible on your character too, maybe with the option to drop it if you're all of a sudden in the middle of a fight and need the extra agility. Depending on the size of your bag, you'd have a certain amount of boxes in the grid that is your backpack. Each item would have a certain weight to it too. Once your character reacher either the weight limit or the space limit he/she becomes over encumbered. As you can see the inventory in that game (which I don't know the name of) lets you carry 5 potions for per slot for obvious balancing reasons. I think this is probably the most realistic way to do it.
Now before you throw the whole, "fantasy games are not supposed to be realistic" deal at me, if there is a page in TES lore that states people have invisible bags of infinite space that cannot be held then it is in fact more realistic to have an in-game bag system like I mentioned. Now of course I could understand why people would not like this, even I'd want to carry as much as I want especially when it comes to loot, so what I was thinking was a skyrim equivalent of the horsebags mod for oblivion except with a higher encumbrance rate and more space. Maybe even have an option of adding a cart to your horse for even more space?
I don't actually expect Bethesda to include this so it probably makes more sense to mod it in. If I ever learn to mod, I'll try this.
The second idea I was thinking of was a pocket system much like that in Witcher 2 (here comes the hate :flame:)
In the middle of combat, I don't think people should be able to take a moment, rummage through their belongings and equip/use different items, I mean, who's going to give you the time to do that? Instead there can be a pocket system that basically allows you to equip small items like potions/poisons or scrolls into 5 or maybe 10 pockets (that might show visually on your character too) that you can access in the midst of combat either through shortcuts or pausing and using (I think there should be a real-time animation for this, but that's a different topic). Access to the inventory should be closed off at this point until you're out of combat/put your weapon away.
So what do you guys think about this idea? I would fully understand why you guys wouldn't like it because it seriously nerfs you from a gameplay perspective but I think it really adds to the immersion and experience of the game.