Mark Driscoll with some thought-provoking words on the truth about Santa at the Washington Post. Here's a snippet:
As the parents of five children, Grace and I have taken the third position to redeem Santa. We tell our kids that he was a real person who did live a long time ago. We also explain how people dress up as Santa and pretend to be him for fun, kind of like how young children like to dress up as pirates, princesses, superheroes, and a host of other people, real and imaginary. We explain how, in addition to the actual story of Santa, a lot of other stories have been added (e.g., flying reindeer, living in the North Pole, delivering presents to every child in one night) so that Santa is a combination of true and make-believe stories.
We do not, however, demonize Santa. Dressing up, having fun, and using the imagination God gave can be an act of holy worship and is something that, frankly, a lot of adults need to learn from children.
What we are concerned about, though, is lying to our children. We teach them that they can always trust us because we will tell them the truth and not lie to them. Conversely, we ask that they be honest with us and never lie. Since we also teach our children that Jesus is a real person who did perform real miracles, our fear is that if we teach them fanciful, make-believe stories as truth, it could erode confidence in our truthfulness where it really matters.