I think it's only for faster select magic or item if you map them, but no use for equipment in the bag. It's kinda weird they put usable item/magic in the same section with your accessories

Fast access to the most used items...?
Since it can get really hectic to scroll through the item you carried while the battle gets too intense! Trust me you would not want to take the time scrolling through the list as you might get wasted in split second for staying motionless in one place at higher difficulty if you're at lower level...

Obvious use. E.g. for dwarf, you can switch between two weapons (enable double mega thor hammer smashes) rather fast this way... or for any characters to access the item skills faster.
Not really! It has some limited uses for Melee fighter... When their weapons are dropped, either megasmash or got knock off... just switch the weapon... but you can only do it once in a row (due to cool down time, mean you can't switch back to previous weapon immediately)...
I found it more useful for Dwarf megasmash!
As the merit to switch between spoiled equipment and fine one is limited by item slots, so can't really justify its use if you do this... Might as well switch the bag in the mid game route selection screen...
I haven't used Sorc/Wiz much, so my best guess is there should be some uses for them too... Weapon attribute which affects the type of magic they pull out too...

The shortcut hotkeys are activated by holding down ^/8(refer to your numpad) on your d-pad or analog(depending on which controls you're using).
A small 4 boxed up icon will appear above your head and showing which icon you've set it to, press it and it'll activate it on the spot.

And somehow I'm still not used to that shortcut, I should though as mentioned it tends to get very hectic at times.
For now I tend to put them very close to each other so I can scroll through easily.

This one quite common in rpg. the left one is minimum damage whereas the right one indicates max damage