We knew we were going to have a big family, and we didn't have a ton of stuff in the first place, but we did keep just about everything, all the way down to leftover diapers as the kid grew out of them. Like serpentstooth, we've kept about one 20qt bin of clothes per size per sex up to about 2T or 3T, then two bins in each size (summer and winter) per sex. They stack nicely, especially in closets.
We've gotten rid of stained and torn clothing, and we don't re-use pacifiers. But everything we've used we've kept for the next kid. Stuff we end up not using gets decluttered.