Are camera cases/bags actually harmful to cameras with retracatable lenses?

I have a Canon PowerShot SX110 IS. It’s an advanced point-and-shoot digital camera. Like many digital Cameras, it has a retractable lens that slides back inside the camera when not in use. I love the camera, but the lens seems to be very sensitive and I get “lens error” messages (indicating the lens gets stuck while extending or retracting) more frequently than I would like (it’s already made one trip to Canon factory service).

I read somewhere that the problem is I’m using a camera bag for the camera. Apparently, the inside of a camera bag is an easy place for dirt to collect, which can get stuck in the lens, making it unable to extend/retract. I also read that if the camera is accidentally powered on inside the back, the lens cannot fully extend and the gears/motor will break.

It makes sense, but is there any credibility to this information I have read? Do the benefits of carrying a camera around “naked” outweigh the risks? Are there any alternatives to camera bags that will afford my $250 device some protection while preventing lens damage?