Pay the guy for training, then literaly beat some guy into a bloody
pulp. You get skill increase, and when your stuff is handed back
to you, you get extra bags. I read on a site that you only get one
bag, but if you do it my way, you'll get more each time. After doing
this twice, i had 8 bags total.
To keep your arrows, which appear in your inventory, don't drag them over to your pack. They'll just disappear. Equipt your bow, and fire them. Then drag the new pile of arrows, from your inventory over to your backpack icon. All is well.
Just watch out for the dreaded giant default cube below. That
seldom happens. And it fades after a while anyway. It follows
you around everywhere you go, and you can even rotate it as the pictures