I have biked the camino several times, never with paniers.
My first camino I used a 30L backpack, it was too heavy and I suffered a bit on the lower back and backside.
But I saw my friends using paniers on mountainbikes and having bolts falling, we had to canibalize from other parts of the bike and buy some on the way.
So, not wanting to pay for expensive paniers and having seen some issues with them I opted again for backpack on the next camino. I used a normal backpack but with an air venting system. It helped keeping the back dryer but the big difference was having less weight.
For the Camino Interior and later on the Francés, I used a smaller backpack and a dry bag on the seat post. A home-made bikepacking solution.
SDC17613 by
eduardodourado, on Flickr
IMG_1757.jpg by
eduardodourado, on Flickr
The back pack is a 17L trail backpack it does not project much out the back and is made to hug the body, a regular sized body anyway, with me its a stretch
It allows me to take plenty of water (2L) which I usually need on hoter days. This constitutes the majority of the 4-5kg of the backpack setup.
IMG_1662.jpg by
eduardodourado, on Flickr
I recommend this setup for the trails. I remember seing people struggling with paniers on their bikes, including my camino companions, along the less cyclable uphills, such as Labruja.
I feel the bike behaviour is not much changed and with less weight on the torso, it is easier to move on the bike to handle the trails.
I definately do not recommend going with large ungainly backpacks. The friend pictured had a very large backpack, which was too heavy and always moving around. Not good for balance.
SDC17606 by
eduardodourado, on Flickr
For road cycling and non tehnical trails, I think paniers will be a great option.
Up towards O Cebreiro we met various peregrinos and bicigrinos. These were taking it easy like us, but I was amazed at the amount of stuff the packed in the paniers and other bags.
IMG_1713.jpg by
eduardodourado, on Flickr
Main point, whatever solution you go for: reduce the weight of your bags.