Can SL run in a low bandwidth environment? Even as little as the 29KB/s of Bluetooth?

Yes. It is most certainly possible to run with very little bandwidth. Contrary to what one may think, requiring a good 80-200MB of textures alone for a single parcel to be fully loaded, the peak bandwidth to be able to download all of the data is not what is important. What is important, are your ping times (or time elapsed for a message to a remote place and back again [thanks Wikipedia] ), and connection stability (not experiencing  packet loss).

Low ping times (in the double digits of milliseconds, 15-80 ms, even up to 150 ms) are important to your experience in SL for being able to request objects and texture UIDs (unique identification tag), then promptly receive the information with which to start requesting the data that the tags call. In other words, quick loading times for objects and their corresponding textures. One last reason that low ping times are significant, are for avatar movements and actions. The less time it takes for you to send your request for your avatar to move forward, or to begin to fly, or the hundreds of other things you can do, the faster you can do whatever it is that you are... well... trying to do.

The second thing, connection stability is important so you do not get "lagged out" or disconnected from the sim, or server you are on. Yes, this does in part rely on the number of avatars in a given sim, requesting all the same information from the same servers, but most often, the connection issues are with the individual clients. (Read the Wikipedia entry for packet loss if you would like more information on that part.)

But at any rate, I have been able to run Second Life, fairly well actually, using my cell phone tethered to my computer using Bluetooth, while connected to an EVDO network... That may sound like a bunch of jargon to some people but its a fairly simple concept... using my computer to connect to the internet through bluetooth and my phones data connection.

Surprisingly enough... it works... and it works well. In comparison to the network at school, where there is over 4% packet loss and 350 ms ping time, through my phone, I get zero percent packet loss, and often between 45 ms and 60 ms ping times, almost the same as on my home connection, just load times that are a bit longer due to the slower sustained download speed.

Again, Second Life does not need the "tubes" to be large, just that they work, and work with great stability, still, more reassurance that Second Life could, with some work, be portable enough to a) fit on a flash drive, and then be b) not as network demanding as it normally would be considered to be, allowing for use in schools, libraries, and other portable devices where network traffic may already be high. The next step in making SL truly portable, would be slimming and optimizing the client to run on less powerful machines... but I will leave that for the expanding group of open source client editors to figure out.