I currently have 2, and we plan 2 more in the future, but we want about 4-5 years before the next "set" of kids. I kept most everything from #1, but I found that w/ #2 I didn't put that many of the old clothes on her, just a handful of sleepers and stuff. Most of the stuff crammed in the drawers was just not used. After baby #2, I'm getting rid of 90% of it! The only thing I plan to keep is the crib, and possibly the swing and playpen. I put each girls' special outfits in their keepsake box (and cloth dipes I loved, blankets, ect.). As for what I'm keeping from #1 to #2 clothing wise from now on, well, usually between teh grandparents the girls get 3ish new outfits per season, and I like to buy a new outfit or two, so the get plenty of nice stuff to wear. I'm planning to only keep 100% stainfree stuff, that is in EC for playing outside in. I've also been decluttering, so I'm keeping the number of outfits each child has to 5-7 good outfits,and 7-10 play outfits (7 bottoms, 3ish extra tops). This has helped me put our "clothing bin" into perspective. I took a little notebook, and wrote out the size each girl could be this summer, and number 1-7 nice outfits, and 1-7 play outfits (with a space for extra shirts). Then I went thru the bins, and filled in. If I got to 7, then I had to get rid of something. So far I know that my baby has plenty of nice outfits, but could use some play outfits, and that my almost 3 year old will probably need some of each before summer. So, when I'm checking the TP or e-bay, I don't overbuy. My goal is to get down to just 1 big rubbermaid container (I currently have 2).
I really think we try to keep more than we will ever need. Each child will get a few new outfits for him or herself, right? And the fewer items you keep, the less you have cluttering up your house and taking up space. B/c of this change in keeping so fewer clothes, I can get the laundry COMPLETLY done at least once per week! That never happened before, and I really think the reason was that I knew it didn't have to be done, taht I had antoher sleeper/ect. so I'd put it off.
One way I've used to justify going ahead and getting rid of the baby items, is to go and look at the items used in the consignment store. If I can sell it for say $20, and a good used one is $40 in the second hand store, is it worth $20 for me to have to store it for 2-4 years, or is my storage space more valuable?