When that container gets full, it's time to weed it out. When the big wicker basket gets full, it's time to give some of the toys to charity, or rotate some of them to that box on the top of the coat closet. It also applies to clothing. If you can't actually put away all your children's clothing, it either means you need bigger dressers or fewer clothes. As the mother of three small children, I don't need to tell you this.
Kids are messy.
It comes along with the territory. So try not to keep your standards too high. Now as far as the crafts go, you're actually going to use some similar tactics. Here's how I'd suggest organizing your closet if you had a few hours in a row to work on it. All the sewing stuff will go in one pile, all the scrapbook stuff in another, etc.