Personally, I would get a slim and lightweight sleeve to put it in, something like neoprene, and then carry that in a backpack/rucksack whatever you wanna call it. The reason why most people over here do this is that a bag that is obviously a laptop bag is a theft target. People will see you are carrying a laptop, and attempt to relieve you of it. A 12" iBook is small enough to put inside a rucksack and nobody would know. It is no bigger than a decent sized textbook. You just need to get a sleeve for it to protect it from the other things in the rucksack.
This is what I did with my 14" iBook when I was at college. It came on hundreds of journeys with me and never suffered a bump or a scratch. I can't remeber the brand of the sleeve, but it was from the Apple store, and wasn't very expensive. $20 or something.