OK currently if it fits it ships... with flat rate envelopes, you can usually stuff 2-4 small paperbacks in there without altering the envelope and still seal it as intended. You're allowed to reinforce with tape as long as you're not altering the envelope. This is a big money saver when sending books overseas, which I do when I trade on another site. 

The rumor is that they are moving away from "if it fits it ships" and not allowing bulky flat rate envelopes anymore. I didn't see any changes on the USPS website. Supposedly it's going to go into effect in a few weeks. 

Any PO employees heard anything about this?

I received an email at work, the Retail Digest, that included an attachment showing a flat Flat Rate envelope, and a bulky Flat Rate envelope, that stated that the bulky envelope could not be mailed at the flat rate.  Here is a link to an eBay discussion where someone has posted the illustration:  http://forums.ebay.com/db2/topic/Seller-Central/Flat-Rate-Envelope/510294022#1293742316948

But who knows, they may rescind it next week.  We shall see.

Ooh you're the best! Lots of links to good information via various threads on the eBay message board :) 

interesting since I have mailed some bulkier flat rate envelopes in the last month and none have come back.

ETA - misread, going to change, not in effect yet

I have read many reports of this unofficial rule already being enforced. There is speculation that they are just trying to push everyone mailing bulky things to use the new flat-rate padded envelopes.

Since the padded flat-rate envelopes cost the sender the same, but USPS undoubtedly more, I'm not sure why they would push people to use them.

The Domestic Mail Manual is CORRECT.  If it Fits, It Ships. 
A NATIONAL Directive is going out to ALL Post Offices TODAY  (1/7/2011) across the US stating the DMM is correct and official.
 

"You can put a shoe or football into a Flat Rate Priority Envelop and mail it as long as the flap reaches the other side so the adhesive closes it. THEN add tape to the sides/seams and seal to reinforce it."

ANY oddball or odd-sized material up to 70 pounds can be shipped in a flat rate priority envelop or box.

Anyone experiencing difficulty or resistance going forward can contact Margaret Peppi at 518-464-7475 or give her name and number to your Postmaster for certified clarification.

I'll bet that's Margaret Pepe.

You're probably correct, out of Albany NY?    A friend did the footwork, made the contact, and got clarifcation.   Name could have easily been misspelled. 

My postmaster got the memo and confirms this. 

I find this whole saga entertaining. I am glad the USPS is finally doing something about  employees making up their own rules that contradict the DMM.