I am looking around my living room right now, and boy am I feeling what you're saying!! I work full time, but can usually do it from home. Now that it's summer my kids (3 and 5) are home during the day and there's no keeping it clean (AND I have a nanny here, running around cleaning up after them!!).
What I have learned is that if I didn't have help, I could never keep my house clean at all, and I would be completely insane. If you're able, hire someone once or twice a month to do the "heavy lifting" chores - scrubbing the bathtubs, toilets, floors, high dusting, and all that. Even your friendly neighborhood teenager could help with this stuff and might not cost too much. I also go to Dream Dinners, which significantly cuts down on dinner prep and actually has helped my grocery budget quite a bit (and it's tasty, so my husband is happy!). That cuts dinner prep from an hour or more, down to a matter of putting the item in the appropriate cooking container and throwing it in the oven or whatever - super fast, no work involved at all, and most importantly, NO SCHLEPPING THE KIDS TO THE GROCERY STORE! Oh, happy day!
As Page was saying, cut down on the number of toys if you can. I go into our playroom in the stealth of night and throw stuff away that's broken or missing pieces. From time to time I send big bags of stuff to Goodwill. They never miss it! Then there is less to clean up and they are not so overwhelmed with choices.
When all else fails, I am really into the Video Sitter, aka TV - for us it was Baby Einstein when they were babies but now they're into the Backyardigans - park those kids in front of it and get yourself 10 minutes of your sanity back! If your baby will not be amused by the TV, then put him in the Baby Bjorn and go about your day. My older one needed to be held a lot and if not for the Baby Bjorn, I really don't think I would ever have had clean dishes, because it's really hard to scrub dishes with one hand!! =)
One time I was over at a friend's house - she is a SAHM of 2 adorable and well behaved children. I asked her how she kept such a beautiful and clean home and she laughed so hard I thought she'd cry. She said it gets clean once every 6 weeks because that's how often she hosts the mommy's group she belongs to. I just happened to be there the day after that! It made me feel better to know that the only moms who appear to have their acts together either have a LOT of help, or it's all an illusion! Girl, we are all in the same boat you're in! Hang in there.