Falicy here, you still need to take into account how much you are losing by not selling the items or mats on the AH. This obviously then means that it makes no difference if you get the cloth or dust yourself and use it for making the bags or sell it on the AH and then use the funds to buy them back off the AH to make the bags.
This also doesn't take into account that it's more expensive for you to use mats gotten while grinding if the item sells to a vendor for more than the mats de'd from it can be brought from the AH. For example, dust is 2g per dust, item that sells for 10g to vendor will de into 4 dust means that you will cost yourself 2g min by de'ing it yourself and using the mats rather than selling it to vendor and buying dusts from AH.
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