Sounds like we have the same toys. ;)
Our Barbies, and all the accessories that go with them, are in ONE tote. If the tote no longer holds it all, then it's time to get rid of some. I don't see the point, however, of getting rid of bits and pieces as long as they all fit in that one tote...it doesn't really save any room. That's my rule for all the sets.
Polly Pockets are in another, small box.
Littlest Pet Shop is all in a tote.
Another tote, full of plastic dinosaurs.
We have one of those nine-square cubby type shelving units, with the canvas boxes. Smaller sets that get played with frequently are in there...pirates in one, Alphie and cards in one, Dinosaur Train in one, etc. A few of the boxes are for miscellaneous...you know, those toys that don't fit in anywhere or with anything.
If everything has a place and is in a set, it's more fun to play. You can assist by taking out one set at a time, or two if they don't want to share, and letting them play in a clean room. When they are done, that set gets picked up and put away before another one comes out.
I have done this for years, and my girls don't seem to get as bored with their toys as you might expect...probably because they aren't all available, all the time.
Anything they are not playing with, and haven't for a long time, get rid of it. Personally, I move it down to the garage sale mountain in the basement, and come garage sale time (June) if they haven't asked for it back, then it goes in the sale.
I do have my oldest help with "getting rid of" decisions, but the above rule still applies because it's hard for them to be critical. She's getting much better, though, especially since she knows that in order to have something new, we have to get rid of something old.