this genius idea from See the Woods and the Trees, linked to this morning. Leanne helped her daughter make a four room dollhouse using reclaimed catalog pages and some cardboard. The result is so cute that it makes me want to have a toddler of my own just to have a socially-acceptable excuse to play with it.
I think it could be made even more eco-friendly by using old cereal boxes or somesuch reused material as the walls. Want a second story? Place another layer of cardboard on top of the first floor, then make another level. (This gives you the chance to paste a floor down, too.)
Best of all, since the dollhouse folds up, it doesn't have to take up a lot of room when it's put away. You could have dozens of setups ready for mixing and matching, and only use a few inches of bookshelf space to store it all.