IKEA!! I love that place!
We bought the Expandia (I think its called that!) wall unit. Ours has 16 cubes (4x4) and then bought the boxes that go in them. It was pricey about $400 all up, but well worth it.
I also took a photo of what goes into each box, so they can see what box they want. My rule is only one box out at a time! Not much mess anymore! i.e. music in one box, Dora stuff in another, dolls in one etc. It looks great.
If you want a pic pm me and I'll send it through.
Oh and for pencils etc.....chinese takeway containers, 1kg yoghurt containers etc. KMart used to have a little white table with 2 chairs and under the table was three storage tubs.
Good Luck, Kat