Yes,, there is a little murkiness about the size of the bag. It should be about 20" wide and 10 " deep and yet you're told to knit until you have 16". I assume the bag is formed by folding over the length and seaming up the sides. Have you followed the method for knitting with this yarn? You stretch out the strand and knit into the top loops opposite the ribbon side.
The method here for the scarf is basically the same one you're using except that you have more stitches. It should be fairly loose and not thick at all.
Can you post a picture of your bag?