Uh, you should have started with the bag on the whip, and walked away with it, before you ever touched her with it... it's much easier for a horse to become used to an object if he can 'follow it', it's less overwhelming, and sparks their curiosity with it.
Although, You WERE on the right track when you had been allowing her to simply circle around you while swinging the bag up and down; if you had continued that, and stopped as soon as she had stopped and been still for atleast 5 seconds, she would have 'gotten' what you were trying to get across. Then you could have changed directions and done the same thing. You just have to be patiently persistant, and most importantly don't go out unless you have a decent time frame to work with, because if you quit before she is relaxed with what you are trying to accomplish.
"The ideal horseman has the courage of a lion, the patience of a saint, and the hands of a woman..."