This is what we took for a 13 day trip to France and England.
The kids were 7 and 9, so their personal items were small backpacks filled with snacks and things to keep them entertained on the plane, plus they insisted on having their personal blankets, neck pillows, stuffed animals, etc.
We will NOT be bringing those things next time, they can use the dinky plane pillows like we do- lol, and they will be occupied just fine on the plane with an iPod and a DS now.
We are planning 24 days in Italy and Germany next year, and we plan to take only about half this much. We're each bringing one backpack significantly smaller than the carry-on allowance that will fit under the seat, plus I might bring a purse. That's it. We can buy anything we find we don't have and wish we did.
I must confess, however, that we DID check luggange coming home. We don't care if they lose our dirty clothes - lol. And yes, when we went to London years before, our luggage was "delayed" for three days, leaving us wearing the clothes we left 100 degree Alabama in, in 50 degree London. We nearly froze absolutely to death! We did go shopping and buy pants and sweaters, but we shouldn't have had to. Plus there was all the extra time at the airport wasted waiting for it, then filling out forms to get it back. That was Northwest. American and Delta have lost our luggage too. So it's not just an urban legend for us. It's happened to us nearly every time we fly.

I don't know what we do wrong; we arrive at the airport in plenty of time, our luggage is well-identified. We have always gotten it back eventually, but the hassle is just not worth it; even on Southwest, we don't like to check. If it's a direct flight, then I will risk it, but if it's a trip of any length, there's no such thing as a direct flight.