There is a crease edge command which can help keep edges sharp when smoothing. You might also want to play with magnets. Only a very sophisticated simulation could account for all the variables you are describing for both materials and physics. If you put a label like a decal on a bag, shouldn't get messed up too bad. Actual uv mapping is more accurate for most things tho compared to trying to use a projection. However, if you post a pic I think you can get more specific help to what specific issues you maybe having.

No need to think outside the box....
    Just make it invisible.