"She needs a large bag."

«надо» is primarily used with infinitives, not with nouns.

You have three problem points in your sentence.

1. Bag is сумка, which is feminine singular.

2. Большой must decline to match the gender and number of what it describes, and so it becomes большая (feminine singular) to correspond with сумка (feminine singular).

3. Нужен, нужна, нужно, and нужны are short-form adjectives which must match the gender and number of what they describe. Since сумка is a feminine singular, you want to use нужна, not нужно. Нужен would be used for masculine singular items. Нужно would be used for neuter singular items. Нужны is used for all plural nouns regardless of gender; you would use that when you wanted to say Ей нужны большие сумки, she needs large bags, or Ей нужны яблоки, she needs apples, etc.