You're not crazy. We're probably crazy for bringing another baby into what's effectively a small 1br suite with a combined kitchen/living area. (Technically it's 2br, but that second bedroom is DH's home office and it's filled to the max with computers, desks and other office things.) There are no closets in the bedrooms. Our washer/dryer unit - it is one single machine - is in the kitchen, so no utility space. The front entrance opens directly into the kitchen/living area. It is TINY. Forced minimalism is the mantra. If you've ever seen some of the tiny suites in Tokyo, that's how we've modeled our living style.
This is how we do it:
--- Cosleeping. I started this after a week with DS mostly for my own sanity (I like sleep and I like being sane) but it could be a great space-saver as well. We have a queen bed and also have had the pack'n'play set up all along, even when cosleeping. It's DS' bed now - since about 13mo he's slept better in his own bed.
--- No change table. Portable change mats on the floor instead. (Also safer and easier to keep things clean IMO.)
--- Sofabed!! We LOVE this. DS has a little congestion and is snoring? No biggie, we'll sleep in the living area. Same for some intimate time. Note the bed has a removable and washable cover, which is great whether it's being used as a bed or for impromptu snack storage when we're not paying attention.
--- Clothing rotation for everyone in the house. Keep a good but small rotation of clothing out based on your laundry cycles. Put everything else away (we use rubbermaid tubs) or donate to charity. Go through clothing 2-3x per year and toss/donate what you haven't and/or won't wear, whether it's just because you never chose it or because it doesn't fit. If you've been having problems with clothing management, push your comfort zone and be a little ruthless with what makes the cut, and shop more effectively (get high-quality garments suited to multiple situations, and less of them overall). Do the same for shoes, outerwear and anything else.
--- Toy rotation. Be choosy with what you keep - make it count, and preferably things that are easy to condense and store, such as a train set with the mix and match track pieces. You can chuck all that into a box in a matter of minutes (under a minute if you've practiced!) and it's good reinforcement for tidy habits. No stuffies in our house, except a couple which stay in DS' bed.
--- Wall-mount the TV and get rid of the TV stand or entertainment center. Huge space-saving potential with that alone! We put the peripherals on top of the bookshelf which is against the wall under the TV. The bookshelf is also deep enough to accommodate baskets for storage of cluttery things like videogame controllers.
--- Storage in every place imaginable. Use the backs of doors, walls, closet organization systems, etc. Utilize under-bed and under-couch storage. Use vertical space. Our "coffee table" is an Ikea HOL for which I sewed a waterproof, zippered liner. Bed linens and blankets are stored in there.
Generally - downsize, downsize, downsize! We have two sets of sheets for each bed and rotate through them. Keep enough blankets for each bed for winter and summer, maybe one more for a picnic blanket and get rid of the rest. Enough towels/washcloths for each person for current use plus one in the wash. If furniture is not being used it gets sold, and consider selling your bulkier furniture pieces and buying pieces which can serve more than one purpose or are more streamlined.
--- Stroller is stored in the car, to keep the clutter out of the living area.
--- Process mail and other paper clutter as soon as it comes in - shred/recycle immediately when no longer needed.
--- Kitchen table is square and folds in half, corner to corner. Easy to move to a wall when not in use. We keep two regular chairs out, with two more folding chairs stored in the closet for when guests come by. This is probably more extreme than most people will need - I wasn't kidding when I said our place is TINY. (I dream of having a regular kitchen table... someday! )
--- My personal preference... use a laptop instead of a desktop computer. Portable and easy to store away from little hands when not in use.
There is one thing that cannot be beat about living minimally in a small space - it's quick and easy to tidy up when everything has a place to go!