First, let me start by saying how sorry I am for not putting up a post since Sunday. My laptop died a couple of weeks ago and Lee's got some sort of virus and is waiting for him to fix it (hopefully it will get fixed this weekend). I have stolen his work laptop to do a quick post.
Since Lee and I are planning (God willing) to have a house full of kids, we kept everything from Luke. We kept all of his clothes, toys, nursery decor, and pretty much everything Luke had.
How to Organize Baby Clothes:
Step #1 - Launder them: Make sure you get all the stains out. If they aren't worth keeping, don't. Fold them neatly.
Step #2 - Sort them: Get a bunch of clear bins with color coordinated lids (blue for boy, pink for girl) or color coordinated bins. Start with the earliest clothes (for us that was 0-3 months and fill the bins).
Step #3 - Label them: Label each bin's contents with a notecard and tape.
Step #4 - Store them: Store them somewhere putting the clothes you will need first the closest (or easiest to get to).
This is great because everything is clean, sorted, and put somewhere where you can easily get to it as you need it.