The holiday version of it's a small world is the best overlay Disney has ever done, and they've improved it since it opened.
The holiday theme meshes perfectly with the small world theme. The integration of Babes in Toyland to the clock show is genius and ties the overlay back to Walt era Disney, making the overlay feel that much more authentic. The added decorations throughout the attraction greatly enhance the experience and fit nicely alongside the '60s imagineering.
It really is fantastic.
This ride and watching the absolutely fabulous Viva Navidad over at DCA are all I need out of a Christmas visit to Disneyland. You do those two things, and you have enough Christmas cheer to last you for the entire month.