Good post by Noel Piper on why it is better for young children not to grow up mixing Santa Claus with the manger scene:
First, fairy tales are fun and we enjoy them, but we don’t ask our children to believe them.
Second, we want our children to understand God as fully as they’re able at whatever age they are. So we try to avoid anything that would delay or distort that understanding. It seems to us that celebrating with a mixture of Santa and manger will postpone a child’s clear understanding of what the real truth of God is. It’s very difficult for a young child to pick through a marble cake of part-truth and part-imagination to find the crumbs of reality.
Read the whole thing.