I've had to deal with lice twice w/my daughters. The first time we tried the OTC shampoo and it did not work. Our pediatrician suggested this (it worked great)
1. Apply a heavy coating of mayo and cover the head with a shower cap (or platic grocery bag or platic wrap) leave on for 3 hours. Put a towel areound their shoulders because the mayo melts and drips. Protect your funiture too, we covered ours with a plastic drop cloth and towels.
2. After 3 hours, was the mayo out, then apply alot of conditioner and comb the hair out with a baby comb, using long strocks, form scalp to end.
3. Blow dry their hair, then immediatly use a flat iron. Use it on small sections, from sclap to end of hair. This is what kills any nits that may be left.
I have used this twice and it has worked both times. My youngest was not 3 the first time.
As far as the bedding, carpet, toys.... Wash and dry the bedding in the hottest water that is still safe for the fabric. What you can't wash (pillows, stuffed animals) put in the dryer for 30 minutes on high. If you can't put it in the dryer, vaccumm the stuffing out of it (okay, not really the stuffing, vaccum it well). Don't forget to vaccum the carpet, mattresses and furniture.
Remeber lice can only live 24 hours without HUMAN host. They cannot live on animals, real or stuffed or furniture. They have found that the whole quarantining of toys and spraying everything in site is unneccesary.
Good luck and remember you are not alone.