OP, are you still around?
Just wanted to lend my support, we have similar thoughts. DH and I are Christians, and we don't teach Father Christmas. I don't think its a Dreadful Thing or anything, jst we'd prefer our children to know that what we say is true, and also don't want to buy too much into the FC thing for anti-mnaterialism reasons. Don't have a big issue with FC on and of itself, but really not a fan of the writing letters and telling FC what you want him to buy, recieving truck loads of gifts costing 100s of pounds etc.
We do gifts (3 each child - as per 3 gifts from wise men), and they get a little stocking full of sweets. All from Mum and Dad. We decorate the house with a beautiful wooden nativity, christmas tree, lights etc, Have lots of family traditions, advent readings and advent tree, carol singing, last year we had 'Jesus Birthday Party' to which we invited friends of verious faiths and backgrounds (being upfront about what the party was for - and yes, they all came. We played the usual party games, made some Christmas star decorations, and had a birthday cake).
My kids love Christmas. I love Christmas! I don't think any differemnce to their enjoyment.
As for other kids - we tell them FC is a fun game that some famil1ies like to play, and that they can say to other children "we don't have FC at our house", rather than commenting on whether or not he is real. Its worked fine. I'd be cross with them if I heard they were going about telling other kids they shouldn't believe - thats not our intention at all. There are plenty of kids who don't do FC at their homes for various reasons, so I don't think you need to base your decision makinhg on what others may or may not do/believe, so long as you teach them to be sensitive.
Re the 'its the same as any fairy story' arguement - I disagree. If my kids read a story about FC and are having a game pretending he is real, thats fine, totally fine. Its the hoax that parents buy into that makes it different. When I read my kids Peter Rabbit, I don't then put rabbit foot prints in the garden, and make little rabbit ears to stick up behing a pot plant, and sugest the children write Peter Rabbit a letter, then fake a letter back from Peter...and thats fine if you want to do that, but you can't really argue its the same as simply reading a fiction story.