Dd is 6 and is a firm believer in Santa. And the tooth fairy. (Not so sure about the Easter Bunny, but he's not so big at our house.) We don't play up either that much, and if my kids ask me for the truth I tell them. Dd has actively avoided asking. In fact, she was writing her latest missive to the tooth fairy after losing her 7th tooth this week ("Dear The Tooth Fairy...."). She wanted to know what the tooth fairy did with the teeth and the tooth fairy's name. But she was afraid to ask the name. She also started to write "Are you my.." then stopped, said "I don't want to ask that" and erased it. So, I think she 'knows' intellectually that I'm the tooth fairy, but she's not ready for it emotionally. I don't think she's ever questioned Santa. She's a girl of great faith.
Anyway, she's now reading the Main Street series by Ann Martin (one or two steps up from Rainbow Magic). I didn't realize when I picked them up that they're aimed at ages 9-12. She's up to the third book in the series, and it's pretty open that Santa is not real. (There are lines like "when I believed in Santa.." and one of the major plot points is that the girls provided Santa's presents for a friend's family who cannot afford presents.)
For reasons I don't understand, dd seems to need to believe (even though she's terrified at the same time of the 'home invader' aspect of it). I've actually said things like "I think the tooth fairy is about 5'7" and has brown hair.." when she's asked what the tooth fairy looks like. She roundly insists that I cannot be the tooth fairy. I suspect she'll be crushed if she discovers there's no Santa.
I don't really care if she 'believes' in Santa or not, but I do worry about the emotional impact that this book is going to have. She's only on chapter 2 or 3 right now. I don't think that stopping reading is going to work, and I think it's unrealistic to expect her not to pick up on the Santa aspect as she's very good at drawing inferences (and these inferences aren't that subtle).
Any advice for how to handle her learning something that she's not quite emotionally ready to handle yet?