My local library also has that (though it's $5/bag). Usually at that point, the selection is fairly pitiful, eg mostly bestselling beach novels that I wouldn't read because the quality of the writing would bug me too much. However, I'm usually able to find enough books to fill one bag. As kids, we had a library full of the $1 bag books, and that provided ample summer reading. Of course, I was much less picky then about what I read--cliched writing/plots isn't cliched if you've never encountered it before!

For discounted recently published books, I like using bookcloseouts.com. 90% of the (current) books that I want end up there. The books are good quality and shipping is cheap for large orders. Otherwise I tend to use half.com which usually has the lowest price available (though shipping can add up and quality isn't 100% guaranteed).