Hanging files are heavier-weight/thicker than regular folders. Therefore, they do take up more room, especially if they hold another folder or folders. I bought into David Allen's system and love it. I have a file drawer almost entirely full of files now, and I find them easy to use. Before it was full, I just put something behind them to hold them up. I started off with extra boxes of folders in the back of the file. When there wasn't room for them, I used smaller things, until I just stuck empty folders back there.

If I were using hanging files, I would have run out of room long ago.

But I do agree -- use whatever works best for you. I don't use manila because I find it boring. I use multi-colors but to avoid the smart warning DA gave about not making it more complicated, I don't pay any attention to which color I grab at any given time, and don't organize by color in any way. I just like the multicolor appearance of my files when I open the drawers.