For my passwords (stored in 1Password), photos (stored in Photos.app) and generic archived files, I’ve adopted a strategy to deal with the unmaintainable mess it becomes:
If it turns out that later on, I need something from there, I will move the item out of purgatory and into its proper place.
Most of my files and photos are still in purgatory, but my 1Password mess is slowly but surely being cleaned up, and data in the 1Password purgatory is slowly trickling into its proper vaults.
I’m not sure how this will hold up in the long term, but for now, having a separate place to put all the things I don’t want to think about is really useful for me.
For the archive, I’ve not been adding anything to the purgatory folder since I started to Organize electronic archives by year.