I have just come out of this situation. I had a 640 square foot townhome, one bedroom, that my husband moved into with me after we got married. We culled, we cleared, but in the end, the place was just TOO SMALL. We had gotten rid of clutter in our lives, but it still looked cluttered. Not because we had tons of unnecessary objects, but because the place was simply not the right space for what we needed in our lives. We had two cats, a home office, and my hobbies tend to be "staying in" things (sewing, playing piano, etc.)
We just moved into a new home last week. It's less than 1,500 square feet and so many people have remarked on how organized I am. We have the same amount of stuff here that we did there, it's just this is the right size place for our lives and what it currently requires.
There's a fine line, for sure...there is "hidden clutter" (like another recent thread) where your clutter might be organized in bins, but it's still clutter. And then there's just living someplace too small. I finally accepted that we were just living in a place that was too small...
We're into a normal sized house for our lives now (a home office that operates 7 days a week, two adults who have hobbies separate from each other, room to entertain friends, a kitchen large enough to actually cook in).
For years I felt entirely guilty that I had this huge clutter problem, and in the end, most of it was just that the space was wrong.
I want to clarify that I'm not saying "Your clutter problem will be solved if you just move into a bigger house!" But I am saying don't automatically assume you are to blame. I've done this kind of living before (3 and a half years together in that little space!) It was not the clutter that was the issue. It was the logistics: our lives, even free of most clutter, simply didn't fit in 640 square feet.
Think about it, most people living alone would feel like 300 square feet is pretty little, but all of a sudden, two people in 600 square feet, and we presume that, if it's full, someone must be a clutter bug? Of course not! We wouldn't tell a family of 6 that they just need to get the clutter out of their lives to comfortably live in a 1100 square foot apartment...we'd tell them "you probably need some more space."
If you can't move right away, one thing that helped us was bringing EVERYTHING out of the place (which we did once to repaint). We stored many things in our garage, even things we used semi-regularly. Coffee mugs that were in constant rotation in the winter were stored there in the summer. I had my lasagna pan and brownie pans in the garage. I stored work clothes at work. And of course, I culled tons of stuff.
I still have more clutter to work through, and your situation might have some clutter as well, but it might just be a bad fit for two people. I hear you on craft supplies...some hobbies just take up more room than other hobbies. Do what you can now, but understand 600 sq feet may never work for you. After nearly 4 years, we finally realized it was never going to work for us, no matter how much we got rid of.