Believe it or not, the Gaida uses a lot less air than you think. The bag is big because it's made from a whole goat, not because it requires that much air.

Bagpipe bags wear out. It's just a fact of life. No matter how well and how often you season them, they eventually get to the point where you have to replace them. The only exception to this are the synthetic bags (and even those will need to be replaced eventually), which do not rot.

Perhaps a smallpipe bag is too small. They make extra-long great Highland bags that should do the trick. I suggested the smallpipe bag because they are usually made of thinner leather, and because the Gaida is technically a smallpipe (Lower air pressure).
Of course, you'll have to get into seasoning the bag and all, and it doesn't look like a goat with it's rear-legs shoved up it's arse, but it should work.

If you know anyone who works with leather, and has a sewing machine that can sew leather, here is an idea that I was considering. Have someone take some kidskin, (known for it's thinness and softness) and have them sew up a real leather kidskin bag in the shape and size of your existing one, making sure to duplicate the familiar animal shape. The leather should not cost you more than $20 or $30 total. The stitching can be helped with really good contact cement around the seams. Yes, there will be unsightly seams, but the bag will be superior to the one that you have, and who knows, you could market them and sell them to other gaida players.