When I was a kid, I was very shy, and had a hard time with the other kids at school. I don't remember how old I was, but I still believed in Santa at an age when other kids didn't. I vividly remember getting teased about it at school, and insisting that Santa MUST be real, because there was no way my mother would EVER lie to me. Then I got home from school, and my mom had to tell me the truth. I was devastated; my mom still thinks I overreacted.
When my older kids were little, we didn't boycott Santa (didn't avoid movies, books, or decorations with Santa, and we even took them to see Santa at the mall and labeled our gifts to them as being "from Santa"), but we made it clear that Santa was just a game. It was a fun thing that we enjoyed, but not any more real than Mickey Mouse or Cinderella. It worked for us, and none of our older kids seemed the least upset by the way we did things.
But then my middle daughter (our fifth child) came along. She would get very upset at any suggestion that Santa was not real. She is almost 9, and still insists that Santa is absolutely real, and will NOT hear otherwise. And I kind of feel like it would be just as upsetting to her if I took that away as it was for me to find out that my mother had "lied" to me. So we have a compromise. She's not allowed to get upset that the older kids don't believe, but no one is allowed to try to convince her that Santa isn't real. It's sort of live and let live.
The only complication is that now our youngest two take for granted that Santa IS real in much the same way that the oldest four took for granted that he isn't. I never argue with them or try to convince them Santa isn't real. If they outright ask me, I say that I don't believe, but it's fine if they do. Mostly they don't ask me. I guess it's good that my kids have the strength of their convictions, and feel confident enough to believe even when half of their family doesn't.
That said, I do insist to all of the kids that Daddy is the tooth fairy. I tell them that he puts on a tutu, ballet slippers, and wings, and he waves his magic wand to become teeny tiny when he collects their teeth. I even have photographic evidence! And I swear that he's got a magic castle full of children's teeth hidden away where they can't see it. Not a one of them believes me. :P