I want to do this.
DSS, age 9, has a ridiculous amount of toys, but most of them are not here, thank goodness. He mostly here in the summer, when we play outside, and holidays, when family stuff keeps up hopping, so toys are mostly an afterthougt.
We have bins under his bed, a big set of shelves mounted on the wall of his room, and he has a closet, a desk, and a bookcase headboard. He does a good job keeping his stuff neat.
As for DD, she's only 18 months. My idea for her is to do categories, give each category its own container, and not let the container be outgrown.
I don't think that books, games, and art supplies count as toys, but they will have their own containers, too.
Books are easy. No more than what fits on the shelves in her room.
Games, I dunno. The jury's still out.
For art supplies, I want to buy her one of these
lapdesks, as they look like they will hold quite a bit.
Here's what I have established for toys so far:
Stuffed Toys: Before she was born, I made a toy bag that ties to her crib. No more stuffed toys than will fit in the bag. I am RUTHLESS about this.
Dress up box: I built an oblong box and covered it with heavy vinyl tablecloth, and mounted a lightweight plastic mirror on the side. I need to run a couple dowels thru for hanging rods, and attach some hooks as well. The dress up clothes and accessories, as well as the playsilks, live in this box.
Puzzles: Buying a wooden puzzle case from LTD. ($8! It's $30 on Amazon.) No more puzzles than what fit in the case.
Kitchen Toys: My dad is currently building two playstands for DD's Christmas present. These and her little wooden table and chairs will compose/deliniate her play area. My dad is also going to build a little platform thing that looks like a stovetop and fits over the playstand shelf, and that will be her play kitchen. I am going to find/build a box or basket that will contain all the dishes, play food, etc.
Blocks: Right now it's wooden, but I imagine as she gets older, it will be Duplo/Lego. For this reason, they are in a clear plastic tote.
And, of course, there is a MISC box. This has her Magic Motzart cube, a bunch of soft cloth and bouncy balls, some plastic clothespins that she really likes, and currently holds the playsilks.
For her next- that is, 2008- Christmas, we are planning on building her a tree doll house. I want to build it on a platform that will be narrow enough to fit on the playstand shelf, and I want it to have a built-in drawer for the fairy dolls and their accoutrement.
As she gets older still, I imagine that she will want one or two nice dolls. This worries me, since doll stuff takes up a huge amount of room. I'm not sure what we'll do with all of it. I don't want her to have Polly Pockets or "fashion" dolls, but I don't really know where this is going to end up.
: We buy a lot of gift certificates or consumable products (soaps, food, etc) or at least *useful* items if we can manage it!
Its the story of my life.
My 4 yo is like that too 
. We don't have many toys because he doesn't play with them unless they are seriously fresh - like just came out of storage 30 minutes ago.
Our house was so over run with toys, and I'd get frustrated with them because they didn't keep them picked up. Well, duh! 
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