Giant capacity containers should be able to hold containers with smaller capacity
 

Tiny should fit in Small should fit in Medium should fit in Large should fit in Giant.
I see no reason why it should not be this way!

You should wear a wrist pouch on your wrists! And belt pouches on your waist!

The same reason you ca t put a portable hole into a bag of holding. You will be torn into a new dimension!

You knew what you were getting into when you signed up.

only 2 slots should let u carry bags one on the back and one on the waist for a smaller size one or wrist

the other slots in ur inventory should only be able to carry items 'ready for use'

nothing should be clickable from inventory at all including jboots AND pumice

Well yeah, if you're using bags that bend the fabric of reality to hold items, sure, you don't want to put them into eachother.

But there's no reason I can't put my fanny pack in my bookbag. No extra-dimensional crises there!

Well, if we're trying to use real world logic when reasoning any of this, then if you put a sword without a scabbard into a bag, it should cut a hole, causing all the contents to spill out and be lost while traveling... and shall we discuss bottle of milk and fresh fish? And the list could go on and on and on.

TLDR: Ruleset

Nothing to do with logic. At the time when this code was relevant
, the code did not permit a bag inside a bag. In later expansions it was modified, but could only be achieved by the bag being empty, and being "collapsed".

Boxes and bags should also be placeable in the primary/seconday slot. A two-handed box holds giant items. One-handed bags holds medium items. Instead, SOE taunted its playerbase with...

https://wiki.project1999.com/Unopenable_Box

None of the mimics or haunted (sea)chests have containers on their loot tables either.