is the bottom of this bag padded?....to protect a laptop from damage if I drop the bag while carrying it with the top handle

There is no padding on the bottom of the bag. The laptop compartment has a narrow bottom created by two seams coming together so it is not quite as thin as the bottom of the main compartment, and it it not padded.

The 16.75 height measurement, is that with or without the carry handle?

That measurement is WITHOUT the carry handle. If you count the handle (when extended) it’s about 20 inches in height.

What's the max diamater bottle it can hold? I've got a rather large 40oz bottle that's 3.5"

I have a 40oz flask and it doesn't fit.

No, it is not waterproof, but it is water resistant to heavy rain. The only bag I would consider "waterproof" is a dry bag that prevents all leakage. If submerged in water or left exposed to rain for an extended period, I would expect the contents of this bag to get wet.

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