The key to digital is having a workflow and a process; and definitely being organized about your system! My system is pretty wacky, but it works, and has worked for a year now, so I'm happy. I spent the better part of 2010 organizing ALL the pictures from our ENTIRE marriage. We hadn't done anything with pictures for almost 10 years. It was a job to print them all off and get them all into albums. I only have a couple of years left to do.
Here is what I do with all my personal pictures (and I take THOUSANDS per month).
1. On my external hard drive, I make a folder that lists the year and month. Like this month it is January 2011 (and it sits there with January 2010, 2009, 2008; you get the idea).
2. On a daily, or at minimum weekly basis, I clean off my memory cards. Inside that monthly folder I have activities that we are doing. Like this month there is "Kids around the house" which is just general playing of the children, "Cancun" which is our trip picture, "New Year's" which obviously is New Year's celebrations. There can be a lot of folders, or just a few, depending on what we are doing that particular month. I dump all the RAW files that I take into those various folders.
3. During the month I edit my picks. My computer sits right next to the bathroom door and while my kids are taking baths in the evening, I will sit there and edit a few pictures while they are playing quietly. I go through and pick my fav's out of all those RAW files and do edits. Sometimes a little, sometimes a lot, depends on the picture.
4. After I've finished editing, the JPG file gets saved into a different subfolder (but still underneath the general month folder) called January 2011 Edits.
5. At the end of the month and after I've finished going through all that months pictures, I order all the edits for our photo album.
6. Once they arrive, I take all the photos and put them in chronological order and slip them into these leather bound albums I found at Costco. I mark dates and activities (and the month) and it's done. Takes me all of 30 minutes.
I don't scrapbook (I'm not creative). And I hate leaving pictures sitting only in digital form. There is something about a printed photo that is so much more impactful, memorable and emotional when you hold it in your hands instead of viewing on the
screen.
I love my photo albums. It is a great pick-me-up when I am feeling down or even just relaxed or lazy - reminds me of flipping through my parents' albums when I was a kid. I do have framed pictures in the house too, but not a whole lot of them - just a few carefully chosen ones. 
