Hi J......your house sounds like mine! I have 2 boys (5 & 3) and a 5 mo old baby girl!
Here is how we do it (it did take some time to get it all organized, but it was well worth the effort!) We rotate most toys from the basement (packed away in rubbermaid tubs) to easy accessible spots upstairs. We keep out the "favorites" (thomas trains, some little people, puzzles) all of the time.
In the first week of every month, we switch the toys. For example....pack up all the kitchen (play food, play table, plates/silverware, shopping carts) and bring up the Tool Bench (tools, tool boxes,hard hats, construction machines) Through out the month, if the kids really want something they have to trade something else for it. If the want some instruments up, then the matchbox cars get packed up and put away.
We have our boys each pick up one thing before nap, and then we all work together and pick everything up at night. Mainly because I don't have the energy during the day to follow after them picking up all the time.
I think any age can help pick up to some extent...we give them different things to pick up. My mom is a preschool teacher and she says that we wouldn't beleive the way kids in class treat toys...they don't appreciate them, value them, or respect them. Thoes lessons start at home.
My oldest had a "just dump everything on the floor and not really play with it" phase around 3 1/2 yrs and to stop that, we did make him pick it up every time he did it. It got old really quickly and he stopped it very quickly. We were very consitant with it...we would help him after he worked on it for awhile on his own.
Every once in a while, the kids do a lot of whining about picking up and how "hard" it is. All I have to say is, "OK...you pick up what is important to you and I will pick up the rest and give it to a boy/girl who will appreciate having it." You wouldn't believe how quickly they move :)
Good luck!!!
PS Our Grandmas tend to go way overboard with toys for Christmas for our kids. We told them this year that 1/2 of what the kids open is staying at their house...that worked like a charm also! Way fewer toys were given and the ones that were given were not as irritating :) Guess the mind games work on the Grandmas too!!!