I would have to say that it depends on the project, for me anyway.
If my project is purely electronic I create a folder in "My Documents" with the project title, and everything goes in there.
On the other hand, if there will be a lot of physical paperwork to do, I will create a physical paper folder, and keep everything in there. If I have an electronic document associated, I print it.
If a project is paper, it is ONLY paper, if it is electronic, it is ONLY electronic.
That is how I work anyway, and it works for me.
Hope this helps.