I had way too many labels because I was always thinking well, somebody might be interested in this topic and it's related to that so I'll label that too .... I have a new respect for the anonymous souls who compile the indexes for history books and biographies. I used to always wonder why authors thanked so and so "for making the fine index".
Anyway, I simply deleted the whole label category from my blog's sidebar. Now my labels below each post lead to other, relevant posts and that's that. No need for housecleaning ....
I have lots of tags, but I don't use categories or labels on my blog, other than my product reviews and contests on the sidebar. I have a google search optimized for just my site, so you can find anything by tag or by subject without having to go through a "cloud" of labels or search through a long category list, and I find that works best for me.
I try to keep it as consice as possible. I was never a fan of scrolling down a page and seeing label after label, though since they're indexed, I want to be as descriptiove as possible. It's a catch 22!
I have a really hard time keeping it down to a reasonable number because I am always worried people might not find what they want, lol. I love wordpress' ability to do subcategories cause then I can set up my template to show main categories and when someone scrolls over them it shows the sub categories in that main category.