Q:

How much does the handy haversack actually hold? 

The handy haversack entry reads:

A backpack of this sort appears to be well made, well used, and quite ordinary.  It is constructed of finely tanned leather, and the straps have brass hardware and buckles.  It has two side pouches, each of which appears large enough to hold about a quart of material.  In fact, each is like a bag of holding and can actually hold material of as much as 2 cubic feet in volume or 20 pounds in weight.  The large central portion of the pack can contain up to 8 cubic feet or 80 pounds of material.  Even when so filled, the backpack always weighs only 5 pounds. 

Does this mean you can decide whether to place a total of 120lbs of items or 12cubic feet of items?  In the bag?  
My thinking is that if you fill the bag with rocks when using the cubic feet limit you can put in alot more than if you were using the weight limit...
Or is cubic feet described meant to only hold a total of 12lbs of weight? 

A:

Those numbers are the maximum limits.  You can have either 120lbs of stuff or 12 cubic feet, whichever condition is met first. 

A:

Think of it in terms of a normal, non-magical, real-world backpack.   It has only so much space inside it.   You can't put more in it than it has room to hold.   It also can only hold so much weight.   If you put in more, the seams will split and your stuff will come out.   Therefore each compartment can hold items that have a total volume no greater than the interior volume of the compartment and no heavier than the weight the compartment is capable of holding.