Ooh, I vote yes on all of these!!
Using the items would help the merchants, and create more of a market for them.
But something like the water balloons? How much fun would that be? And it would give people a reason/another way to interact with each other. And it could be snowballs in the winter. Pies during thanksgiving if we wanted to be messy!
And having more events with your active pet would be awesome, like stuff that happens at the Springs, where there's a chance they can get hurt, or maybe when you explore the Atqueen forest, they're the ones that sniff out things to find when you're exploring.
Better yet, maybe you find different things depending on what sort of pet you have with you? A Zenrix would sniff out different things than a Valabex would; The Zenrix more likely to find another pet or a hard to find egg; the Valabex more likely to find a rare flower. A Goiba would make it more likely to find some Tu, since they like shiny things, a Myotis might find you a rare fruit. Just examples. And it would give people a reason to take different pets out, to get different things. Maybe there could be an explorer avatar if you took one of every kind of pet out.