I've got my yarn in a plastic tote (about 18" by 30") in my craft room. I have a pretty "current project" basket (about 12" by 15") that gets to live in the living room, it's also convienent for long car trips (knit half a scarf on a trip to Chicago recently
). My limited collection of needles (I've got like 6 pairs) live loose in the yarn tote at the moment. If and when I get/need more, I think I'll sew a holder and keep that in the yarn tote. Of course, if/when I get more knitting needles, there'll probably be an accompanying influx of yarn and I'll go to multiple totes.
One thing that helps is to label your areas. The few things I have organized are organized because it's clear in my mind what they are for. Like, I have the "fiction bookcase" so all the fiction in the house is regularly put away and organized. However, I've also got, "that bookcase that's kind of for whatever comes off the dining room table, but I really don't know what it's for" that's always a huge mess. Anyway, just designating a home for your knitting should help it be organized.
Also, if you aren't using ds's room as a room for him, maybe you need to rethink it's name. Could it become the "indoor drying room" while ds is in diapers? And then "ds's play room" and later "ds's room". I'd just mount a clothesline inside the room.