For a kid that age, seeing his name anywhere is fun - or for my kid anyway.
He used to watch wordworld a lot and one day drew a picture of himself using the letters L I A M.. it was really cool - the lower part of the L was the smile, the top part became the nose, he drew two eyes between that, the M worked great for legs, etc.
Would he dig it on underpants? Probably, but there is more value in the backpack. I want him to be excited about picking it and all the other school related stuff in hopes of having him excited about school - lame? Maybe, I dunno.
When I asked him to pick a pack he wasn't too interested, when I said he could put his name on it, he became interested, and remained so even when I told him - yes a lie - it can only be his initials.