Was sympathetic when I read of HCW's experience in a blog post of the same title. We had this problem twice (though not in the past 2 or 3 years, thankfully!). The first time, we literally went all out with the lice shampoo (which we still have some and I really should get around to throwing it out), daily vacuuming, washing and putting away all brushes and toys. The second time, we just did the nit picking with the metal comb which after the first experience we decided was what worked best.
After all, if the lice and nits are so hard to come off the hair how can they stick so easily to pillows and sheets. I'd seriously like to see a randomized control trial of how effective daily washing and vacuuming plus nit-picking is compared to just nit-picking. From our experience, all the other activities were just time consuming, stressful and pretty much useless.