FWIW, I did a small one (5"X8")
I did by category first - Mickey and friends, Princess, Movie Stars...
Within the category it is kind of a combination manual/alphabetic listing.
For example, Mickey is first page in "Mickey and Friends", then Minnie, Donald, Daisy...
For "Princesses" and |Movie Stars"|, alphabetic with related entities together (Anna is in her alphabetic location, Elsa is right behind Anna despite being an E)
Size was a concern for me so I made sure I had both her favorites and most likely meets and then several blank pages at the end to accommodate the random collection of others she may or may not meet. I tried to keep ours capped at 50 pages.
The two I was torn about were Alice and Mary Poppins. Are they "Princesses" or "Movie Stars"?