Congrats on the windfall. I'd choose an amount to spend completely frivolously (and enjoy every penny) and then do something responsible with the rest.
$150 - We gave to a pro-life charity.
$100 - Buying a bigger car seat and bouncer (the kind you hang on the door) for the baby.
$30 - Date with the wife. We had fun just the two of us!
$150 - New Ecco dress shoes for work. I usually buy these every 2-3 years and my pair as my wife pointed out is wearing out.
$??? - Contemplating upgrading my wife's line to get her an iphone. I have a couple of lines eligible for upgrade on our AT&T family plan. $.99 for an Iphone4 8gb, $99.99 for an iPhone 4s 16gb, $149.99 iPhone 4s 32gb (Refurb). So far not a big fan of the iPhone 5 due to the change in connectivity... That would mean upgraded a lot of accessories, etc.
My phone line isn't eligible for an upgrade in Feb of 2013.
Time to start saving
The rest is going into savings.