My mother never really made much fuss about Father Christmas, tooth fairy etc, and I don't ever remember believing in them. My friends' parents used to do much more, and I used to feel I missed out a bit.
I have always told my girls that Father Christmas, Tooth Fairy, Mickey Mouse etc were real. Youngest DD, 6, is still fine with this. Eldest DD, 10, has worked out the truth, but likes to keep it going, partly for her younger sister, but she loves it too. She knows that FC doesn't really go right round the world on Christmas eve, but she loves to play along, and we watch his progress via satellite on the internet! She knows the characters wear costumes, but she still loves to meet them and get their autograph. It was great in Epcot one year, we met the princesses at the breakfast, and met them again later on in WS. They were the same princesses and they remembered my daughters! I thought this was amazing, when they meet so many people. That was real Disney magic.
Both girls asked when they were younger why there are so many different FCs, and we just said, he is so busy, they are all helpers. They were convinced a few years ago, because we took them on a Santa trip to Lapland - they met Father Christmas in his cottage, and he had the letters that they had written to him - it was fantastic. Younger DD now says to me, 'I know the ones in shops are his helpers, but I've really met him!'
Beware, SBKline, when your children are in school or nursery, and your child tells all the other children ' there is no Santa, my Dad told me' - he will tell all the other children, and you will have a lot of angry parents after you! It happened in our school. LOL. Its your choice, do what you think is best, but you will get some very upset parents - and children!
P.S. A friend of ours told her 11 year old daughter after Christmas that Santa wasn't real, and she got really cross, and said they had ruined her Christmas!