As far as the smell, the bag was water-tight, so quite possibly air-tight as well. This could have significantly reduced the odor.
Prior to working in the library, you might recall Andy worked in the Laundry.
After god knows how long in a prison laundry, I'm sure you could become quite the expert at folding laundry. If he folded the suit nicely, it could have remained fairly wrinkle-free.
Also....remember that when the police were searching for him the next morning..."all they found was a pair of prison clothes and a bar of soap," so technically....if the suit did smell at all he could have used the soap!