What a thread! I was thinking of starting my own this morning....."Why I don't believe in Purge-atory." How about that for borrowing quasi-religious language? It sounds to me, Elizabeth, that you are making changes that will get you there. It's OK to take it slow. I think you've uncovered your core task yourself. You mention that your closet is "too full" and you can't see what's there. I'd suggest donating what doesn't make you happy, but perhaps trying capsule dressing for awhile -- rotating items in an out in large capsule that you wear for 2-6 weeks. Let your current capsule have the prime real estate in your closet.
I've been focused on on wardrobe building, and when I release an item, it's because it doesn't serve my larger purposes. It's like a builder taking unused bricks to Habitat's Re-Store because it doesn't work with the new foundation. I'm more focused on learning from what doesn't work, buying within my means (which is a tough challenge with my tastes), and creating a style that sends me out into the world feeling confident, comfortable, and ready to be my best self.
I'm well aware of some of the "original source material" behind some of our "stuff guilt." Matthew 19 / Luke 12:13-21 are important lessons for me. Not preaching here, just sharing. For me, of course, there is an effort to remind myself to seek God first, but all of us have goals higher than our stuff!
I have a small closet (but I kicked my DH out of it), although I do have several drawers for loungewear, underwear and gear. Right now, I have a holding bin for things that I love but won't wear, or that almost fit (I only keep these for a year), and I put out of season or probationary clothes toward the back of the rod, or the top of the shelves.
Because I tend to evaluate my wardrobe by outfit creation once or twice a week --- a half an hour or so playing around in my closet. I remove items that aren't serving my goal of a real wardrobe -- with a sense of ensemble, not just star players and cool clothes, as I play. I have a basket for Goodwill that I donate when it's full. Removing things slowly, and in the cause of having a better working wardrobe, makes letting go much easier.
I have mistakes. Even post YLF. I try to make these items work and, even when I fail, I often learn something in the process. I feel these mistakes are fewer now, but it took me a while!