I've faced the same dilemmas as others have mentioned in this thread. My wife and I bought a few reusable canvas bags earlier this year and quickly cut down on our plastic bag consumption so much that we soon had nothing to bag our garbage in, which we are required to do before we throw it down our condo garbage chute.
Feeling slightly silly, we finally bought some biodegradable bags at Whole Foods. They're made out of corn starch and degrade completely in the landfill. At about $7 for about 25 kitchen sized bags they're not cheap, but this gives us incentive to ration them more carefully. And of course we still pick up the odd plastic bag here and there, so that $7 can get us through about a month of regular kitchen garbage. All the big bulky stuff like cans and cardboard tends to end up in recycling, so the actual bagged garbage we generate is quite minimal.
http://www.biodegradablestore.com/product_comp/pp_bags_bio_comp.html
As for the fixation on plastic bags: I agree, it is silly on some level, especially if that's the only change you make. I agree there are many other bigger issues that are not being addressed. However, it frustrates when I see this argument applied to every small lifestyle change. The idea is not that by simply avoiding plastic bags the world will be saved; the idea is that if many people make many small lifestyle changes -- reducing plastic bags, driving less, changing to low-energy bulbs, composting, etc -- that the
cumulative effect will be more meaningful. This theory sounds more appealing than making a lazy excuse to do nothing.
And yes, too many of the things we buy are over-packaged, but nobody is making us purchase them. If we stop buying them, they will stop making them. Conveniently enough, I've noticed that the same foods that tend to be horrifically over-packaged also tend be overpriced and over-processed junk. One more reason not to buy that crap in the first place, I guess.
