Ever situation is different and everyone has their preferences, but I would think 1 1/8" would be wide enough for commuting on city streets. Seems much wider then most 700c tires I see people commuting on out here. Maybe your roads are much worse or you just prefer a much wider tire. I wouldn't think a bag on a rack would have a huge impact - I assume you don't have a 50 lb bag on there. I guess it would add some weight over the rear tire so make sure you have enough air in rear tire.

I can say I have been very happy with Gatorskin tires as far a flat resistance goes. I have over 1000 miles commuting on my 23mm gator skins, including some rough roads, with no issues so far (knock on wood).

Good luck when you test them out, and look forward to hearing how the work out.