My children do not have an awful lot of toys; they have each other to play with, and their imaginations, for the most part. Catalogs to cut up, boxes, some dolls or stuffed animals, a few have collectibles of one sort or another. They seem to enjoy life just fine! We do have an abundance of books. ;)
One idea is to pack up about 2/3 of their toys. Just sort them out and put them in boxes, preferably without the kids seeing them (late at night, naptime, or have a friend take the kids for the afternoon). Leave out the ones that you think they play with the most. Hide the boxes somewhere: trunk of the car, under your bed, in a closet up high. Then, if one of the kids asks for a certain toy, tell him you’ll look around for it, and later go to the box (without the child!) and take it out and give it to him. You can find a toy on the floor or shelf later to put in the box in its place.
Eventually the kids will realize that some of the toys are put away, but they may not even complain other than asking for particular toys. You can point out how much easier it is to keep the toy area picked up when there are fewer toys. Then, if you think they’re ready to sort through the toys and select some to give away, you could do that. As you go through the box, you might want to allow each of them ONE or TWO toys to keep. They’ll probably see some little thing that you never thought was important, and really want to keep it. This gives them the feeling that they have some control over it. Having the toys out of sight for a month will probably help them to understand that they really don’t need that many.
Another related issue is relatives who give gifts. Perhaps you need to explain to the grandmas and other folks who give the children these toys that they have too many toys, and would they like to get the child something else, say, a savings bond or maybe educational software or something instead of more toys? It is very hard to keep the toy mess under control when there is a constant influx. :(
Hope this helps!