Is Organizing Toys in This House Futile?

I'm determined to de-clutter this house and part of the process is organzing the toys. As I spend time doing that today I wonder: is it really worth it? By 'it' I mean my sanity of course.
Flashback: 2006. My husband and I just got married and bought a house. The house is spacious for the two of us and pretty organized, right off the bat. Occasionally we have to clean up the extra bedroom I deemed my 'dressing room' and the laundry elsewhere, but that's fairly standard. The house only has big people stuff, so the floors are clutter-free, there is nothing extra that is left out.
2008. My son is born. We have a few extras now: pack-n-play, baby bouncer, swing, tummy-time mat, a few rattles, bottles, diapers and wipes. Oh yeah, and a dog. Not too bad. Since he--the baby-- wasn't able to really get around and make a mess yet, there's no problem. We still can keep things pretty organized.
Then, the first Christmas and first birthday attack. Here come the toys: blocks, trucks, animals, cars, puzzles, balls, etc, etc, etc. Ok. I can handle that. We keep the toys in the now designated toy room. They are kept in a psuedo toy box--a plastic storage container. Just one. I handled that well and began teaching him how to clean up. Big baby items are now stored away for any potential siblings. Wonderful.
Then the second Christmas and second birthday attack. Yikes! Everything has just now doubled. And the house has suddenly gotten much smaller...There are toys everywhere. Still, my son knows how to clean up, but everything is mixed since he plays with a few different things at a time.
2010. We add another baby to the mix. Things don't triple; they quadruple. Back out come the baby things, along with new toys and games and everything else. There are days when things don't get put away. I am sore from my second c-section and from an injury I sustained a year earlier, so I do a little at a time, but the mess begins to grow. The house is cleaned, but by the time it comes for organization, I'm zonked.
Today. My now three year old and eleven month old play together, plus my niece who comes just about every day. It's like an all day long play-date. There are toys everywhere. I've had it, and I know my husband has had it with the clutter. Today I started to de-clutter. As I'm doing it, I have a small crowd behind me, undoing the organization. And I know, once I do have everything in its proper place, it's all going to happen again.
Remember: I'm determined. I need to find a proper balance in all of this before I go stark raving mad. Christmas is soon upon us, and even before that, there's my daughter's first birthday.
Here's a plan of attack I'm thinking about:
1. Separate toys according to type: blocks, books, cars, animals, etc.
2. Place sets together and place in separate container: wooden blocks, Cars Duplo Legos, Noah's ark, kitchen set, etc.
3. Decide which toys will stay out for a few weeks. Place other toys in the closet. They can be rotated later.
4. Donate any toys not being used, i.e. McDonald's figures, other little toys.
5. Discard anything broken, despite attachment.
It's a start, right? Is it futile to even consider this?
I forgot number 6.
6. Pray for one piece toys or clothes for gifts.
Ah.