I totally agree with taking digital photos and making an "art book" for each school year. If you ever do a project at home, take pics of your child(ren) making the project to put along side the finished product photo.
The Container Store has great bins - there is one which is about 2-3 inches deep but about 12 inches wide and 20-24 inches long. I stack them on top of one another in the guest closet and label each one with the year. That way, it's all organized by year, and there's enough room for some of the larger projects that you WANT to keep. We call them "memory boxes."
I also put photos, ticket stubs, park information, and any other momentos/keepsakes to save from trips or fun events during that same year. Someday I hope to scrapbook it all, but if I never get to it, it's still a wonderful way to preserve the year for us all to enjoy in the future.
You got a lot of great ideas in your responses!