Does the hiker carry the bag until exiting?
I asked that question to the ranger I got my permit from for a northbound JMT. The answer was - if you use it, you carry it out. You cannot burn it and there is no drop. That was in 2009, but I don't see how they could change that policy.
That's correct, but that's a big IF. The point is, there is no requirement to use it. Once you do, it simply becomes a littering issue, just as with everything else you carry.