Welcome digger! I know exactly what you mean by fighting fires. Our clutter totally gets in the way of family life, both physically and mentally. Slowly but surely it's starting to change, though - you're in the right place! :o
In other news I talked to DH about the possibility of Baby #3, in about a year or so... HE SAID YES!!!
:o Even more reason to continue embracing minimalism.
Erin, thanks so much for your reply. That sounds like a great system! We won't be adding any more furniture, can't even move things around really - it's quite a small bedroom (84 sq ft) for one child let alone two! If we move (hoping to in the next year or so) hopefully they will have a room each, or at least a bigger one to share. We will be starting from scratch with their furniture too as current stuff is starting to fall apart - probably a cabin bed each for starters.
At the moment they have a 9-drawer (the shallowest ones) Trofast for clothes, and apart from that it's just the cabin bed storage: a small wardrobe, a couple of tiny shelves, three little drawers and a desk space. She doesn't use the desk though as any drawing or writing she does downstairs or in bed. So it just gets used as a dumping ground.
One of the shelves is used for bedtime story type books. Apart from that it's anything goes at the moment! Most toys will still need to be stored downstairs as there's just not enough room. In fact currently we have some in our bedroom too! Clearly we need to cut down further as well as organise 
It's hard though, they really do play with pretty much everything. I've got a couple of things in mind that my friend (reception teacher) is very excitedly taking off my hands, but apart from that it's proving spectacularly difficult.
I like how you've organised the bedside drawers and shelves, I'll definitely take some inspiration from that. :)
Yesterday went well, we had about 90 mins of clearing EVERYTHING from the floor, threw away lots of obvious rubbish, and basically everything else, unless it already had a place, went into one of the bigger (equivalent of 3x shallowest) Trofast buckets. Organised bookshelf too. Today we will do about an hour I think.