You will need:
1. a common backpack with a large main compartment, padded shoulder straps, and a coat-hook loop on the top.
2. a hydration bladder, $10 from Walmart.com http://www.walmart.com/ip/Cyclone-Hydro-Reservoir/17217805
3. an old pair of jeans with big legs (large or baggy enough that the water bladder can fit in the leg through the ankle hole, and fill up to capacity (2 Liters)
4. 1 or 2 cheap carabiners,
5. pair of shoelaces
6. needle and thread, scissors, knife
Note: for the one shown here, the denim water bag rests on the bottom of the backpack well enough, I did not need to add reinforcements, so the water bladder hose is routed through the open top of the denim bag, and through a reinforced hole near the shoulder strap of the backpack. This works well for me. The strap used to retain the hose is an old bicycle pump strap (velcro).
Step 1: Prepare the Backpack.
Cut a small hole (size of US penny) in the right and left bottom corner of bag, for the water hose. You may want to delay this step until you see where you want the hose to go. ****Depending on hose length, you may need to have the hose come through the backpack at a higher point, so it's extended enough to drink from while wearing pack. The holes will also be used to thread strings through, and tie to the bottoms of the shoulder straps, for stabilizing the water bladder.
You might want to cut a reinforcement backing for the backpack, from a piece of cloroplast (campaign sign). Just use trial and error to cut to fit snugly in the back of the bag. You can poke holes through it and thread the coat loop or carabiner, and strings through it later.
I will add more photos later.
Step 2: Prepare the Bladder Protector
The bag made from the jeans leg will hold the water bladder and protect it from things in the backpack such as boxes or tools.
Cut the leg off the pants and stitch or glue closed where you cut it, leaving the original hem intact so you don't have to sew anything there. Roll it down for strength and to make installing water bladder easier. Don't fill bag yet.
Make a hole for the carabiner to go through, which will hold the water bladder by the hanging tab and connect to the coat hanger loop inside the backpack. It's good to stitch around the holes so they don't tear.
Make 2 holes opposite each other near the bottom corners of the bag, big enough for the water bladder hose and bite valve to go through. Reinforce the holes. You need 2 holes so you can use either side, and to run the tie-down string through. d
Step 3: Install the Bladder Protector and Bag, Tie Down With Strings
Install the water bag, with the hose going out desired direction, through main bag, attach carabiner to the hanging tab, and fill with a pitcher.
Use a piece of shoelace/string to tie the middle of the hose to the shoulder strap somewhere convenient to you, either a loop or tether, so you don't have it dragging the dirt or getting in the spokes if you're biking.
Test the bag with a few household items.
That should be all. You should now have a durable, comfortable bag with 2L water capacity. (Or 4 if you add a duplicate bladder and bag protector and carabiner. 4L is about 1 US gallon so that should be PLENTY for a long day's bicycle ride or hike, or you can fill the second bag without disturbing the first.
Enjoy your bag and the $100 you saved! Maybe buy some shoes.
I like sewing pieces of DOT cargo trailer clearance marking tape to my bags, for visibility on the road or by flashlights.