We hit the outlet and find great deals! The majority, if not all, of the items were from WDW, so the quality is comparable. We got some light-up toys for $1, Halloween jewelry (flashing light necklaces, bracelets) for about $3 a pop, frames for $.39 and 2008 Christmas ornaments (we were there in December 2008) for $1.99. I also like to get trading pins here. They're ridiculously inexpensive, and the kids don't care about trading them because they're not usually a character/theme of interest to them.
That said, we still spend a lot in the parks. I don't budget (we're on vacation, so we pretty much do what we want finance-wise), but we end up spending about $600 over a week (that's for four adults and two kids) on souvenirs. The kids always buy a new playset (DS is always adding to his monorail), we get several shirts for the kids and a few for ourselves. I always like the pick up a CD or two. My niece has to buy every ride picture she's in. Not too much when you buy it one at a time, but when you add up all the receipts, it can add up quickly.
It's easy not to spend money, though. There's so much to do that you can go a while without even stepping into a store (save exiting a ride) for souvenirs. I also like the free souvenirs (stickers, Kidcot masks, we always save a cup if it's themed, etc.).