What seems to be working for me at this moment, though I've only tried it in public a couple of times and with friends a few times, is to use small groupings of songs (maybe 3 or 4) with only maybe one instrument change in the middle. That way I can still combine songs and tunes I like together without committing to a whole set at a time, and plan the instrument changes more gracefully. Each small set of songs has its own dynamic and somehow seems to fit pretty good with any other small set.

My biggest grief is smooth instrument changes because I like to use several guitars for the variety of sounds. The right chat/joke/gag/dedication can distract the audience from the technical changes and smooth out the transition. I personally like historical context or irony but any kind of skilled storytelling will work. Having said that however, sometimes a quick change without talk can preserve the mood.

I like this thread. Mooh.