Well, I'm not entirely sure how much is just right yet, and from what I've read around here it seems to vary from family to family based on how often you want to wash, etc.
I love what someone suggested to me which is to pull out every bit of their clothes, sort by "outfit", and then keep a certain amount of outfits (she suggested 5), and then pack away everything else someplace where you can get to it. If you find yourself running out of clothes you can pull out another outfit or two from the packed away clothes and then when you are sure you have enough give everything else away.
I think when fall rolls around I'm going to do this and keep 8-10 outfits for each girl. I know that sounds like a lot, but I like to wash their clothes once a week. I would keep less, but both girls like to wear dresses almost every day, and I do like to have at least a couple pants outfits around since sometimes dresses can get in the way when your a 3yo. So, I'm thinking 7 dresses, 3 pants outfits, 2-4 sweaters, 1 winter coat, 1 raincoat, 4 nightgowns, 1 pair really warm jammies, for each girl...but that may end up still being way too much. I guess we'll find out in fall.
If you figure out the "right" answer be sure to post back here as I'd love to know.