Comment by throwanem

I had mine separated out by type (function) as you describe, and unsorted by color. That worked, and would continue to do so until the collection reached a scale far greater than anything I ever contemplated.

You're right about the need for individual separation when selling parts. Bricklink does that, so that people in need of, say, exactly four orange cheese wedges, can go and buy them. That seems to be the preferred style for most builders, since it makes possible a mapping from a parts list to a purchase order; there are other styles in use, including bulk sale by mass or approximate quantity, but the individual price for a given part is much lower when sold in bulk than alone. So if it can be made feasible to automatically, or mostly automatically, sort down to the individual part level by type and color, that'll show the best return on investment per part at the point of sale.

(Update: based on jacquesm's comments elsethread, I don't suppose I can any longer recommend selling on Bricklink. But I'd imagine the pricing effects I describe are similar elsewhere.)