I have a contained toy room - it's a must for me. They play, and if we don't feel like cleaning up, we shut the door and walk away. They don't have toys in the bedrooms, we have a small basket in our living room (mostly filled with baby toys). All toys are mostly concentrated in the toy room. When we had a smaller home, I put I. and G. in the same room, just so I could use the other room for a toy room.
Toys are stored in bins - like with like. My kids are really good at sorting these toys out. The ones that are played with more often, are kept out. The others are in the closet.
Every bin is labeled - with a picture. We just sorted some toys out, and don't have pictures for some of them, but the bin does have a label. If all the toys don't fit in the bin, we kind of go through them(or at least I do in private) and make sure there aren't any ripped or broken toys taking up valuable space. They don't need much more than a bin of toys. I. used to have Barbies overflowing, but she always played with the same 3 or 4. We took out all the ones she's not a fan of and now the lid shuts.
We have had a problem though. We store the bins with the lids closed, on top of each other in the closet. We've done it that way for years. It worked, but it wasn't easy. They would get out everything, if they needed a toy on the bottom. It was hard to put the misplaced toy away - you had to take out the stack and that was just too much for my little ones. I started getting these Itso Cubes from Target. They make all these features for it - shelves, fabric bins, etc. I already had the plastic bins and didn't want to spend any more money than I had to.
I love these cubes. They fit a bin with plenty of space - we can store them in the cubes without their lids on or off, which makes clean up so much faster. Sometimes that extra step of opening the lid is enough for them to call cleaning up "hard." They fit nicely in the closet. Now, little M. can even get what toy she wants out - independence can be bliss for a mommy. They're sturdier than I expected. I figure we can use these anywhere, once my kids get too old for a toy room.
If I thought Tom would go for it, I'd love to take off the closet doors and add some curtains - something Michael Millerish would be perfect for our room. I'm pretty sure that idea wouldn't fly with Tom. I have been known to do things without his permission, though.