I really don't see the argument and think this falls under different styles of parenting. I am comfortable with the traditions in our house and have no problem using the naughty or nice aspect.
Using your argument I guess I would be at fault for allowing my child the imagination she has and especially for playing along with her as she is being chased by a lion or becomes one herself and chases me. I would never squash this part of her nor would I deny her the right to experience the idea of Santa and like I said before... I have no problem using the naughty or nice aspect to have her rethink her actions. Just like I use her daily imagination to show what is right and wrong behavior and vice versa ... she is always showing right and wrong behavior with her stuffed or imaginary friends.
