we freecycle and/or donate a lot of our stuff...and the junk get thrown out...
When ds1 was younger, I gave SO SO SO much stuff to daycares--they LOVE to have toys and kid furniture that is in good shape. Clothes are always good too. So that might be another option. Women's shelters need stuff constantly too, but I haven't dont that,so I'm not sure how they deal with donations of kid things...
as for talking to family, this xmas we told them that ANYTHING with batteries was getting donated to the Salvation Army. We didn't care what it was or how much it cost or how collectible it was. We also sent them a list of things the kids wanted/needed....from places like chinaberry.com, rosiehippo.com, and the like.
And...our other big thing was to get family to PLEASE give the kids money for their activities. Ds1 is taking gymnastics and ice skating and wants to start karate...ds2 was doing gymnastics (but we opted to stop that and use the $$ towards membership at the local kids museum and zoo!)
It went over REALLY well--both kids got great stuff and family wasn't too offended
well..my parents did buy a couple of huge things (a wooden rocking horse that is almost to big for our 9yo, nevermind our then 21 month old!!) that they are upset had to stay at their place ( :LOL downstairs :LOL )....but our place is just too small. We were polite, but firm--they were okay with it, just bummed that THEY had to find room for it!