We put our application in order of the checklist (barcode pages, forms, documents, proof of relationship) and just put in one big envelope. There is also a big thread on here where someone shared photos of their application - divided into 3 envelopes. I know a lot of other people have done this. Really no right or wrong way to organize it as long as everything is included!
I am in the process of an appeal so I have received my full package back from Immigration and as most people have said on other posts the agent that looks at the file changes it to the method that is used by agents that work on it. They do a table of contents page with the name of the sponsor in bold letters at the top as well as the name of the sponsored person in Bold letters below it. The numbers of the forms and the pages that it contains. Each page is numbered the same as a book. These pages are in the same order as specified in the guide for each country. photo copies of pictures and who is in the picture and what the the picture depicks. I did not include a cover letter but I did put the bar codes on top and made sure that I wrote outland on the first page as I had read that some files get misplaced to inland by mistake. one idea that I have read lately regarding pictures is that a Lawyer used was to put a sticky note on the front of the picture explaining what the picture was for (of course this should not cover any important part of the pic) and put 3 or 4 pics on a sheet of paper. Any agent looking at the pics can see immediately what it is for. The most important thing in my opinion is to make sure all the forms are up to date as they do update forms and if you do not send the most up to date form it can delay the application process.