Why not teach kids the history behind Santa Claus?
Talk to them about the man named St Nicholas who started the entire thing and maybe even teach them about how other cultures celebrate. Then, maybe you can mix some of those traditions into your own celebrating.
Another idea is to make it into a game, where if they are good and go to bed on time, they'll get their presents from "santa claus".
I agree that I don't think we should perpetuate a lie to kids, although since I don't have my own and other parents want their kids to believe in Santa, I sort of play along with it.
While the Santa Claus we know of in media today is indeed fictional, he is a tall tale based on an actual real man. There is also a man in Alaska I have heard, that dressed up like Santa and goes to a Wendy's, which I heard is decorated for Christmas year round.
Look out Rudolph, Santa might just replace you with the cute, magical, Christmas Kittens!