Our system seems to work for us as long as we tackle it a load at a time. Ideally, we would do just one load per day and we'd be fine. Our system also differs from winter to summer. We have limited space for hanging laundry inside even with our line in our laundry room and 2 sets of drying racks. I can get 2 loads worth of clothes hung on what we have but its never completely dry before the next day which screws up our 'one load per day' routine
During the summer, we're fine. Right now, not perfect but this is how we deal with it.
We only wash a load of anything when we have a FULL load. We have a huge capacity washer and dryer and we're pinching pennies by only doing full loads since the energy requirement for running them is pretty much the same if its full or a half load.
Darks/Blacks - Always in cold/cold; all jeans/pants hung on line; the rest MIGHT end up in the dryer depending on if dh needs work clothes...
Lights/Whites - Usually in cold/cold sometimes in warm if I need to soak them overnight; Almost everything goes on the drying racks.
Diapers/Kitchen laundry - Has its own pail in the kitchen and gets washed when full. Soaked in cold w/borax, spun out. Washed in warm, rinsed cold. Almost always goes into the dryer. I don't like how crunchy our diapers come out from on the line. I will allow the diaper stuffers to dry on the line though.
I NEVER fold while I'm in the laundry room
I like to multitask so I'll fold while watching ds or TV or hanging out with the kids. Our laundry room is HUGE but I don't like the inconvience of having in the basement. None of the clothes STAY in the basement so I just fold them where they get put away. If I'm going to handle the clothes over and over, I prefer to just grab them off the drying racks or out of the dryer and fold them and put them away at the same time.
I typically wash 80% of the laundry but I everyone puts away their own clothes. So everyone has their own baskets. They're color coded too which helps. I don't sweat sorting by colors really except for new clothes or very red or very dark items. All dh's clothes for work are black (chimney sweep) so all his stuff gets washed separately. Everything else is typically fine as long as its washed in cold.