Check out my WIP post I have some pics of what I did using Vinmanmacs Backpack he did. As far as clay, there are several to choose from at say Michael's. I used the Air Dry Soft clay for my dread beads and that pretty well and easy to sculpt and manage. Just make sure you have a small bowl of water near by as it makes it easier. Just like any other clay water is a great way to keep it moist while working.
If you plan to use clay for your backpack, make sure its not one you bake, because that may cause you a few problems and not sure how well a clay that requires baking will work using a heating gun. Never tried it before. but if it requires baking and you have plastic already on there you could run into many issues with shaping or loosing bends and shapes.
On my backpack its 75% Foamies. I used a 3 inch bent PVC curve pipe, the bottom of a Tupperware bowl, empty Acrylic Paint Bottle, 2 small pieces of Split Cable Tubing, and a piece of 1/4 inch Plywood.
http://www.thehunterslair.com/index.php?showtopic=24408 See the bottom of first post. and you will see 4 pics of it and get an idea.
Hope that helps you out Luke.
-James