The following list of defects in CD packaging design was partially drawn from Tibor and Lulu Kalman's article "How to Open a CD Box" in the 12.13.1998 issue of The New York Times Magazine.
Because jewel boxes are such a pain in the ass, most people I know with large CD collections have bought some kind of after-market storage system which allows them either to dispose of their jewel boxes altogether, or to keep them in a box in the closet awaiting the day when they decide to sell their discs. I use a special detachable- binding plastic sleeve system I bought from Levenger, Inc. for $80, but if I had it to do over again, I'd do what my girlfriend Melody does--keep them in 3-ring binders using the inexpensive vinyl sleeves sold by office supply stores for filing CD-ROMS. Both she and I have taken literally hundreds of jewel boxes to the dumpster. I tried recycling mine, at first, and found that they couldn't be recycled. Then I tried giving them to a used-CD store, but they didn't want them because they already had so many extra on-hand. Finally I gave up and just threw them away. I keep 5 or so on hand in case I decide to sell more discs than I buy, but I've never had to use them.
Reusing jewel boxes as picture frames is the most effective way I've found of recycling them. The primary function of a jewel box, after all, is to prettily display the packaging in-store. Appropriating them to display your own images is nicely subversive. Jewel boxes are cheaply (often, freely) available, and can be easily replaced if damaged. What's more, the lid of the jewel box can be partially opened to prop up and display the picture either horizontally or vertically.
To fit into a jewel case exactly, a picture should be resized to 137 x 117mm.
I have heard, but not verified, that used jewel boxes can be recycled by mailing to:
Plastic Recycling Inc
2015 South Pennsylvania
Indianapolis, IN 46225
Although direct recycling (reusing, really) is preferable in terms of energy conservation to materials recycling, a person can only stand to have so many picture frames. If anybody can verify this company and/or this address as a secondary option, I'd love to hear from you.