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That's brilliant. Thanks for sharing the details. I do a similar thing using OmniOutliner and printed lists, but will use your system in OF once I get my iPhone.

One tweak on the system: You could flag the items that represent staples. This would make the pre-shopping-trip review more efficient. For example, on my list Milk is a staple but Turkey Pepperoni is not. Before I go to the store I just check whether we need any of the staples. I only worry about the non-staple items if they were unchecked during the week or while planning menus. So I never forget to get milk, but I only buy pepperoni if we're going to make pizza.