I always consider the sleeping bag (or quilt) to be the most important item you buy for backpacking. It defines all your other gear choices. It adds the most comfort to your backpacking experience, and the most safety. A big, heavy, sleeping bag requires a big pack to carry the weight and bulk. A light weight, compressible, bag can be carried in almost any sized pack.

With that said, it is my opinion that the sleeping bag/quilt is the most important item, and therefore should be allocated the most money to acquire.