Bomb Bag Upgrades Locations and Guide
It's usually common for Zelda's to have a single Bomb Bag and let you upgrade the capacity it can hold throughout the game. The Twilight Princess is a bit different since there's not just a single type of bomb in the game. In this game you have Bombs, Water Bombs as well as Bomblings.
Instead of letting the player upgrade their bomb carrying capacity you actually will get multiple bomb bags for carrying each of the different bomb types. The first bag is given to you through regular game progression while the two optional Bomb Bags can be acquired right around the time you unlock the Lakebed Temple.
One of the Bomb Bags is found in Zora's Domain and one in Zora's River - making it relatively easy to grab both back to back. Neither of them are challenging to acquire and they mostly just require you to assist the NPCs in this location with mundane tasks.
If you already have the Shadow Crystal and can transform into a Wolf whenever you want - port to Zora's Domain to begin the side quest. If you don't have the Shadow Crystal yet you're gonna have to hoof it here... get it? Hoof it since you gotta ride Epona? What a knee slapper!!
Zora's Domain Bomb Bag
Remember the large piece of rock that we brought to Zora's Domain with us to thaw out the Zoras? Well oddly enough that piece of rock has a Goron inside of it! You will want to equip your Iron Boots and sink down to the bottom of the pool in Zora's Domain. Place a rock next to the pillar and blow it up!
He'll thank you for freeing him from the rock by giving you a Bomb Bag. How he was able to survive in the rock without air is just as confusing as how he's able to survive under water without it too. Gorons, what a mysterious race!
If you are still having trouble finding this location take a look at my map below. I am standing right in front of the pillar when I took the screen shot!
Zora's River - Bomb Bag #2
The second and third optional Bomb Bags for you to acquire are just south of Zora's Domain at Iza's River Rides. I will get to the third Bomb Bag later but it takes place in this same location. When you first arrive at this location speak with Iza and she'll tell you that the ride is closed down because the river is all blocked up.
Twilight enemies will spawn in this area and after she watches you defeat them she will deduce that you are indeed not an idiot. Offer to help her unblock the stream and she'll give you a Bomb Bag loaded with bombs and tell you that you can keep the bag for helping her out.
All you really have to do is blow up two walls and ride the boat all the way down the river. It's extremely easy to do despite the canoe being nearly impossible to control (thank goodness it can't be destroyed on you). Once you meet the Zora part time worker it gets pretty funny as well.
After you finish the event the Zora takes the canoe from you and returns upstream. You're now able to return to Iza's River Rides and start another minigame which if you successfully complete that you'll be rewarded with the final Bomb Bag upgrade in the game.
Zora's River Bomb Capacity Upgrade
The Giant Bomb Bag isn't just another Bomb Bag for you to store bombs in... This Bomb Bag doubles the carrying capacity of ALL your Bomb Bags!! You can get this Bomb Bag by returning to Iza's River Rides and participating in the minigame where you have to shoot red and green targets while going down Zora's River.
Out of all the minigames this was by far the most difficult for me to do in the game. It took me a total of 3 tries and I couldn't avoid colliding with a wall at minimum of 3 times on each run. I think I only missed one or two jars and I scored 28 points in total.
I would assume there are 30 - 35 jars in all meaning there is very little margin for error.