You are aware that this would be worth a whole frikkin GUI in on itself, right? There will be extremely many equipment Slots for different things like for example Rings for each of your 5 Fingers per Hand. 4 of those five Slots could be occupied by a single Brass Knuckle, sacrificing the space for a Punch based Melee attack Bonus. So yeah, there is a LOT. And ofcourse it will show an encumbrance Bar of sorts.
Having more space based on the Pockets/Backpacks you wear is definitely planned. Though there will be a basic Bag of Holding kind of thing that most Players will have by default, simply because massively limited Inventory is not a thing everyone likes.
That is also an Idea on how specifically Backpacks could be done, especially the large Backpacks. In my lines above I meant mostly the things you have easy access to, like Belt-bags or the large bags you wear on your Side instead of the Back.
The Backpack could have its own keybindable Menu Entry (could be used for Back-worn Swords and Stuff too) to move it from your Back to your Hand, from where you can place it on the ground and rummage around in it, like a Minecraft Shulkerbox.