This is a terrible market for selling houses. You will want to talk to your real estate agent, as she will know the best way to "stage" a house for selling in your area.
I know when we sold our first house, we were advised to remove almost everything "personal" from the house. Too many personal touches and decorations and the buyer can't see him or herself in your house. They said we could leave up one pic of each kid and that was it. Most of our nick-knacks, pictures, paintings, wall hangings, etc were put in boxes and stored.... and the house sold.
The house smelling good is a must. I used to take a pot of water, put a few cinnamon sticks, some cloves and some ginger in it, boil it as soon as the real estate agent called, then let it simmer for a while, then place it in the oven. The house would smell like someone was just baking, but it was really subtle. I would always clean the toilet right before someone showed the house, as well.
CLEAN! Have nothing on your sink and counters in the bathroom and kitchen, clear tables and surfaces, make beds. Yes, neutral colors are best, because its easier for the buyer to see him or herself in that house.
But, I would talk to the real estate agent, because different things work better in different areas, and in this economy you need the best advice available.