I was 10 and my DM told me the truth - up to that point, I had no idea it was only a story!
I would like to think that if someone is going to someone else's house for a visit, they would fit in with the host's plans and traditions. Particularly at Christmas. There may be allowances made where beliefs and traditions differ between the 2, so some may go to Mass or similar while others don't, for example. But surely no-one would be so horrible as to shatter a 3 year old's beliefs at such a time?!
That said, if you think that there is a way around it (doing stocking in your bed, BIL and family arriving on Christmas morning rather than the day before, etc), I would examine those.
But I would also feel that, as the OP said, BIL has "invited himself and his family", that it is MY house and it is ME (and my DH) who gets to decide who we want to INVITE to stay, not just be told that we are hosting X number for Y days with Z requirements (whether that's food, entertainments, or beliefs). So I would be letting those who wanted to stay with me know what suits DH and I, and when they are welcome to come to stay, for how long, and what parts of the festivities we expect them to assist with (whether that's bringing parts of the meal; specific or general things like beer or snacks or Christmas cake or cheese for the meal or over the few days; specific jobs to do like peel the potatoes or washup after lunch or make the breakfast or keep on top of binning the wrapping paper; or even bring their own bedding or towels or a spare blowup bed if needed to accommodate such numbers, those sorts of things).
And I would also hope that people with such a sense of entitlement wouldn't then decide to hog the remote control, refuse to go out for fresh air, and just demand certain food and drinks when they want them expecting the host(ess) to be on their feet at all times.
Then again, I had a really bad Christmas last year, when I was expected to travel and fall in with everyone else's plans without a thought for me at all (no forward planning, not being able to enjoy a quiet 10 minutes alone in 4 days, and just bone-weary exhaustion at it all) so I am feeling ungenerous at the moment.