They had this on my flight from BCN at the weekend.

I had a small under the seat bag, which went under the seat, and a large paper carrier bag. Neither had the blue tag. I put the carrier bag in the over head as I'm not sure it would fit under the seat in front. I was a little concerned that the crew would insist that it went under the seat as it didn't have a tag. I also heard the IFL/CSM/ISD/Whatever mention to another crew member that nothing with a blue tag should be in the overhead, which also raised my concerns a little.

Turned out I was fine!

Although it does raise the question that if the ground crew do inadvertently miss something that wouldn't be practical to under the seat, quite how strict the crew would be about it. I'd like to think they would take a common sense approach...