I understand why one would think this is a combination of rugsack and backpack. What most American and Canadian people may not know though, is that these words are not English to begin with. Luggage is "Gepack" in German and bag is "Sack". A Packsack is the German word for bagage sack. When searching for the meaning of the word on the Internet though, I found mostly pictures on German websites of modern bags of the "rollbag" type; a large cylinder shaped sack that can be filled through one end of the cylinder. Then you roll up the edge of the open cylinder side and lock the ends together with a click lock.
So, in Germany, this word is used for something else than a backpack. A backpack is called "Rugsack" over there.
And in America the word is not just used in Ontario, Canada, I suppose. In Stephen Kings book "The waste lands (The Dark Tower part three)", one of the characters is a young boy who lives in New York. One morning he packs some stuff: "In the back of his closet, ....., he found the packsack he had worn to grammar school". He keeps on using the word several times after that, so it must be familiar to people from Maine too, I guess.
"In the back of his closet, he found the packsack he had worn to grammar school".