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I have seen cases that allow the Apple Air tag to be attached to the handle / exterior of a suitcase / backpack.

I would think that it would be preferable to keep the tag inside the backpack / suitcase (that is not metal / shielded), so it does not become lost / stolen / damaged.

Is there any reason not to stowe the air-tag inside the item I would like to track?

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Based on my personal experience, and this article even with a relatively large plastic suitcase, the air-tag is still able to effectively transmit its location when stored roughly centrally inside.

If you feel like it, you could find a simple means to attach the air-tag the inside of the case - perhaps as simply as taping it would be effective, then there is the least material to potentially block the signal. However this is likely to be overkill.

As you have mentioned, I would be more cautious if the suitcase were made of metal since that may result in a Faraday Cage effect blocking the transmission, but even then the risk is not likely to be great, and could be tested before travelling.

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I also think Apple AirTag should be in the inside of the backpack or suitcase to avoid theft and loss. I have also tried using it on a metal suitcase and confirmed that it still works, I just put it close to the plastic handle inside the metal suitcase. 😊 If you’re wondering, the signal that the AirTag emits would be slightly decreased due to the metal suitcase, but the decrease is minimal.

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