Of course there should be limits on home rule.
It is such a terrible thing that the city council in Martinsville is not allowed to pass legislation banning black people from living in the city because of state law. To paraphrase the Bloomington Herald-Times, my opposition to the state anti-discrimination law dwarfs my reasoning for opposing a local ban on black people living in Martinsville. I do not agree with banning black people from any city, but as a supporter of home rule I think we should respect democracy and allow the voters to decide for themselves through their elected officials.
Note for the terminally stupid: That opening paragraph was satire.
It should be obvious to everyone why there are limits (and why there should be limits) to "home rule" - the ability of a city to legislate and manage its own affairs. Cities are not allowed to ban people of a certain race or religion, they are not allowed to randomly execute people on the street, they are not allowed to take property without compensating the owner, and they are not allowed to do a plethora of things because they are restricted by state law and the state constitution. For that matter, states are not allowed to do a plethora of things because of the federal constitution. Even as someone who is more adamant on states' rights than most, I recognize this is a good thing.
Government has checks and balances for a reason. In our system of government, we do not allow government to trample over individual rights or pass oppressive legislation just because it reflects "democracy" or the "will of the people." We do not let local government run rampant because restraining it would "silence the voices" of one thousand people who signed a petition. Home rule is important and states' rights are important, but limited government and individual liberty are also values that we have protected (if imperfectly) since the founding of our nation and state.
Now, whether allowing local government to ban plastic bags is a good idea is another debate. Personally, I think it is good that the state government protects our freedom to make our own choices in the grocery store against the tyranny of the majority. But even if one thinks it is bad public policy and that the city council should have the legal authority to pass this ban, using "home rule" is a simplistic argument. The readers of the Herald-Times deserve better than these weak arguments on a major public policy issue.