One thing that helps the space problem is to sell off most potions. The ones that turn out to be useful are healing/elixir, antidote, absorption, strength increasers, speed, heroism, invulnerability, master thievery, perception, mirrored eyes, eplosives, power, and defense. Ditto most of the general scrolls (protection from magic is always a keeper, though) and priest scrolls. Also, Dark Side increases stacking so that you can have 50 arrows and 100 bullets in a quiver.
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