I'm inclined to believe that a good convertible pannier/backpack is in fact impossible; the qualities that make for a good pannier make for a lousy day pack, and so on. Depending on how much you carry when hiking, a small handlebar bag might be enough, it's what I use. I just added a third leg strap to keep it stable. If you need a little more storage space, you could use something like this.

On a related note, can anyone think of a clever way to use the frame of a backpack as the base of frame of a trailer?