We live in a tiny cottage and we have far too much stuff. 2 sheds plus two outhouses. And I have 18 of those vacuum bag of clothes in the loft.
The things that really work for us is to freecycle/chuck stuff you don't use. I am a terrible hoarder and until last month I had 8 bags of baby clothes and 3 bags of old clothes that were being used for gardening. It was great to get rid of them.
Books are more of a problem as we have thousands on book shelves which don't look too bad so I think living someone small means that you have to cope with it looking more 'stuffed', not necessarily messy but just more.
I also find I have to keep on top of paperwork constantly - best example is that we have replaced both cars this week and there is two huge stuffed folders of crap to get rid of (old mot's, service docs on the old cars) - with our house being small there is paper on every surface this week that needs to be tidied, all the documents and all the id needed to sort it out.
The upside is that it is easier to keep a small place tidy as a 10 minute tidy up can make a huge difference.
Is the cute cottage somewhere nice? Ours is right in a town centre and next to a park so we actually are really lucky with amenities - if we moved to one of the estates for a bigger house we would lose all that. We spend quite a lot of time outside because of that.
If you're into crap films there's a film called 'the Holiday' with Kate Winslet and she lives in a tiny cottage with great storage - bookshelves above doors, individal chairs rather than sofas, less ornaments and candly crap.