The same thing happened to me when Milly was around 4 months old. I took her in her bag to sainsbury's (which is a large supermarket in London) and the security guy very rudely came over and said I needed to leave. I ignored him, second time he was even more rude and said he is calling the manager! I said OK come on then!

The manager was much nicer and explained how some customers might not like a dog in a supermarket despite the fact that she was not in contact with any food etc! (god knows why, but OK I respected the managers words and stood outside while my husband paid for the goods). I just wish people would be a bit more nicer about lettings us know about no pets being allowed! Be NICE!
And having a little dog in a 'doggy bag' is not cruel at all. If the dog didn't like it he/she would most definetely let you know! Mine loves travelling in her bag especially if I am going inside a store, she loves to nap in there or watch people go by, and yes she does have plenty of walks! Totally understand your rant!