After a Mothering boards discussion of this exact issue a few years ago, my SO and I sat down and had a long talk.
A little background:
My SO is from a large Catholic family and celebrated the holiday tradition with the aspect of S.C. when growing up. My dad comes from a large Catholic family and my mom comes from a big Jewish family. We celebrated several holiday traditions when I was growing up, and we did have the S.C. tradition mixed into our Christmas celebrations. My SO and I differ in how the S.C. aspect of Christmas manifested itself when we were kids, but we both have that in our history.
My sweetie and I agreed upon the following:
*We both enjoyed the S.C. aspect of Christmas growing up. It was really fun, even after we found out exactly what was going on.
*Even though we have different personalities, neither of us was traumatized at all when we found out the Santa who gave us presents was our parents
*We value imaginative play we can do with our kidos
*We don't want to lie to our children
Here's our agreed upon approach for the future that we came up after talking:
*We do the S.C. thing.
*We don't invent any elaborate stories about S.C., allowing imagination to take over for the kids. We all hang small stockings Christmas Eve, and they are filled over night. In the morning, these treats from Santa are enjoyed before we open presents under the tree from each other.
*Child is old enough to ask=child is old enough to know. If one of our future children happens to ask at a partciularly young age (3? 4?), we will try asking him/her what she thinks without actually answering the question ourselves, etc. However, if questions are persistant, regardless of age, we answer honestly.
*Our explanation (basically): There once was a real man who delivered presents to people, especially children, in celebration of Christmas. When this old man died, people wanted to carry on his tradition. To carry on the spirit of "old man Christmas," people play Santa for each other. It's all about fun and the spirit of giving (and the spirit of giving anonymously). There are traditions like this all around the world (which we can read about together as a family).
*Our older children are free to "play Santa" for eachother, if they want to get up in the night to leave presents in stockings. This is a fun game we can all participate in!
That's our solution
. It works, and it's fun.