I use two Wald folders in the back. I doubt they would fit three gallon jugs in each--not long enough, sizes are listed on the site. Wald now includes larger clamps in their hardware kit to accommodate the larger rails that come on some racks. I use them and haven't had any trouble yet. I just zip tie them to the vertical rack support to hold the bottoms. Easy and it works. I just use a bungee on each side to keep the empty baskets closed tightly=rattle free.
Mine have to be quite far back to prevent heel strike so they are mostly behind the axle. I added a front basket to throw a counterweight in. A two liter usually does the trick. I don't like too much weight in the front, but I can get as much in the back as I want to pedal so it's not a concern so long as it holds the front end down. The front basket is as low as it hangs with factory hardware. I could be lowered with the handlebars, but comfortable bar placement comes first.
The book bag is for bananas, eggs and bread. It's by far the easiest quick method to transport them damage free that I have found. It only comes along when those items are needed.