I am so sorry for your loss. Why don't you take some of the special items, blankie, photos, etc and make a shadow box to honor those memoies with?
As for the "stuff" in the closets....check out www.Flylady.net. I love this site, I even belong to a local group that follows her suggestions. She says you can do anything for 15 minutes. I know how overwhelming cleaning out the whole basement or closet can be. This allows you to break it down into more managable steps, and not spend a whole weekend cleaning/decluttering.
I agree with keeping some of the toys if you have another child. But I try to keep up with things that have gotten recalled since my girls used them and now my son is using them and I have found a few that I had to get rid of.
Also, you should remove the batteries from them as you pack them away. A good way to sort is newborn-6 mos (rattles, soft toys) then 6-12 mos, etc. Kind of how you would do clothes. Then when you need them again, you can grab the appropriate box, not several boxes that need looked through to find the right things.
What I did when going through clothes was to toss any stained things, anything elastic is giving out, etc. I also took into consideration how long these items would be stored before I would likely use them again. With stuff my son has outgrown that is new I am saving for my sister in law. But stuff I got from my sister that my now 8 and 6 yr. old nephews wore is getting donated. By the time my son used it and I store it and maybe someday my SIL has a boy and uses it, this stuff will be 10 years old. So I have found it better to bless someone else with it to use now. Hope all that makes sense!
For the artwork, I made each of my kids an under the bed box (plastic container) with their names and put "special keepsakes" on it. After school papers are removed from the fridge, they go in the bins. Periodically we go through and toss what they no longer wish to keep. So far it is a good system, they are learning to weed out more and more, yet not forced to do it, nor do we do it when it is brand new art. Whatever made it to the box cannot get tossed without my say so, because there are a few items I would like to keep. We are going to work on taking photos of allof this, then they will each have a photo album and I am going to put a sign to represent each grade and put them in order that way.
As for the rest of the house, keep it simple, one drawer or one shelf at a time. I try not to purchase anything I don't love, when I buy clothes or shoes I try to take out one item from my closet. I put a lot of things on Craigslist or Freecycle, sometimes ebay, or I just donate it.
I hope this gives you some tips. Again, I am so sorry for your loss, hugs to you.