I don't have kids so I'm a marginal commentator here. But I'd prefer if children didn't do any kind of religious ceremony, which is a different thing than having them learning about different customs. Here's my reasons, other than separation of church and state. Firstly, there's too many religions that would require observation and I'm not sure that this is the best use of schooltime.
Secondly, when schools tend to do these things, they tend to homogenize them as if the holiday meant the same thing to all the members of that religion. Obviously this isn't the case. Christmas means differnt things, has different emphases, and even different dates among the spectrum of Christian groups (Russian Orthodox, greek Orthodox, Catholic, analytical Protestantism, evangelical Protestantism). Here's another example: Chanukah. In the hierarchy of Jewish holidays, Hanukah is nearly at the bottom of the list of importance. Essentially, it's a holiday celebrating national independence with the Macabbee insurgency throwing out the Greek imperialists. That is to say that it doesn't have much religious components. The rabbis who decided what texts would be included in the Old Testament where so upset by the secular nature of the Book of Maccabees that they did something very unusual: they added a second book, which now contains a description of "miracles" in order to give it a religious overlay.
For many centuries, Hannukah wasn't celebrated that deeply, and often its main image, other than the special candle-holder, was that of elephants, since they were used by the Greeks as war-machines. Only after the State of Israel was declared did Hannukah began to be a big deal, since Israelis turned it into a kind of second Independence Day celebration (something that makes the days awkward for non-Zionist Jews). And with the increasing commercialization of Christmas in the US, Hannuak became a kind of surrogate retail opportunity, which also bothers a lot of Jews, since traditional Jewish law has a lot of regulations about not allowing wealth disparities to be seen within the ethnie. Now it would be interesting for students to know the internal differences among holders of the same religion, but I'm not sure that a relatively untrained secular teacher could pull this off in ways that aren't offensive. These would be better served in a space about the sociology of religion, not in an attempt to mime the events.
Back to context. Why can't the period be simply a secular holiday time? England has a perfectly fine alternative tradition for this period, which is the tradition of children's pantos. I'd rather children act out some fairy tale or pirate narrative than a nativity scene.