I spent three months living out of a small, ratty backpack in Costa Rica, and it was the best travel decision I made.
When two of my travel buddies had their brand new packs stolen, mine was safe because it was old-looking and ugly. The size of my backpack forced me to pack light, and every time I used public transportation I was grateful.
My friends would drag their huge packs onto crowded buses and take out people in the aisles, but my pack kept me nimble and friendly with the locals.