We sure did when the kids were little. They eventually figured it out on their own, esp the youngest, who is naturally more cynical than the girls were at his age, living with 2 sarcastic and jaded teenagers!
If we had another child now, we wouldn't do Santa, as we are now practicing pagans. We have Holly King, but he is a symbolic-diety-archetype. He doesn't bring presents. When I put tags on gifts tho, I can't help but say they are from--Santa, Mrs Claus, the elves, Rudolph and the other reindeer, just as my mom used to do!