Our kids are allowed to get backpacks with wheels, but are not allowed to roll the backpack on school property (it becomes a hazard when it's rolling behind them and kids aren't watching where they're going, so they trip over them). We found it easier not to have one at all, but we're over a mile from school, so we drove their kindergarten year.
I would tend to get a simple backpack (large enough for a folder and lunch - I agree, you don't want them carrying their lunch separately - it will be forgotten in the car). The more pockets and padding it has, the heavier (and more expensive) it will be.
Our school allows water bottles, but has some (loose) guidelines: it should have a "sport top" (the kind that pops open to drink, so you don't have to unscrew the lid ever time). They also suggest the koozie-type thing that keeps it insulated (for their purposes, there's less condensation making a puddle on their desk).
We usually get our supplies at WalMart or Target... Good selection; great prices.
Good luck! This is a fun time!
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