A caster has Leomond's secret chest and casts shrink item to carry it around (while it's not on the ethereal plane) regularly enough to warrant spending the experience points to cast permanency on it. (hasn't happened yet but I anticipate that it might)
Would the permanent shrink item spell effect take into consideration the contents of the container each time the command word is spoken, shrinking the chest and its contents as one item, and reverting it as one item?
Or, would the chest itself shrink and the contents burst out explosively?
One reason for uncertainty is that the spell states that each time the shrunk item is restored the spell ends.
Restoring the shrunken object to its normal size and composition ends the spell.
The ordinary duration for this spell is the length of time that an object may remain shrunk; Under the permanency spell, the duration is changed to permanent, meaning that it can retain it's shrunken form indefinitely and, in addition, an object can be shrunk and restored an indefinite number of times.
"It's only described that it can be shrunk and restored an indefinite number of times, but the spell effect is still ended when the object is restored. The shrink item isn't a continuous spell effect. The spell effect only becomes active when it's activated again, taking the object as is. As long as the lid is closed the space inside the chest should be included as part of the chest, with objects placed inside or removed a part of that chest as is."
(this is the type of arguments my players make)
What's the best way to handle this permanent shrink item chest?
The answer also affects every other application in this regard: a spare quiver, a waterskin, coinpurse, cloak with pockets, an object repaired with new parts, those cumbersome saddlebags, or even a wizard's spell book adding new spells