My brilliant husband gets credit for this idea. I told him what I was trying to do, and he made it happen. This lovely storage box came from Grangier. It isn't the cheapest possible option, but I like it because the letters fit easily, the clasps fasten the lid securely, and it has a handle. If you're looking for a cheaper option, check a craft supply store for a bead storage container. If you want seriously cheap, an egg carton will work. The main goal is to put each letter in its own compartment so that it can be found easily.
Before we put the letters in, I followed Montessori's direction and wrote the name of each letter on the section where it goes. Clean up time is not the time to tax tired little brains!
We put capital and lower case letters in the same compartment. There's plenty of space, and so far my kids don't seem confused. If one of them was struggling, I'd make a point to store capital and lower case letterers separately.
I'm looking forward to pulling this out many, many times in the coming years.