I keep all my supplies in our basement - but my sewing machine is on our landing upstairs. Not ideal, but I make it work for now.
I sort my fabric by color and keep them in plastic bins (what a shock!). My kids play in this basement, so do their friends, and I don't police this area. The bins keep them contained, and little fingers away. I put all types of fabric, just sort by colors.
On the top of these cubbies I have buckets. The big one holds scraps. The great Target Dollar Spot bins hold works-in-progress, and at the end is a bin which holds extras to monogram (onesies, bags, pillowcases . . .)
This works great for us. I can hardly keep my oldest daughter out of them. She can dream faster than I can create - isn't that always the case.
I'll leave you with photos of Martha's craft room . . . a girl can dream, right?