There is a difference between religious beliefs and tales of Santa Claus. But not necessarily to kids. The parents want them to believe in Santa, much like they want them to believe in Jesus (or reincarnation, or whatever belief). So with kids, I'd just treat it all the same. Respect the other parents' right to teach their kids to believe in fairy tales, and the kids' right to believe it, even though they are obviously folk tales.

Whether parents should "lie" about these things like the tooth fairy or Santa is another debate, but ultimately it's their parenting choice and it should be respected by other parents/kids.