Gather the kids and have them decorate cookies, or cup cakes. This is a fun activity that can last a few minutes to an hour depending on how many cookies you have prepared for decoration and the variety of items to be placed on top. Let them run wild with their imaginations. Don't be afraid to let them use frosting bags. They manage quite well with a little help.
When the cookies are completed let them wash and settle into a movie, or writing a letter to Santa. Then what better way to get the kid's excitement to sky rocket than a surprise visit from Father Christmas himself. Getting a costume is not half as difficult as you might imagine. (Finding someone to wear it might be a bit trickier, but still manageable.)
Other Christmas party ideas for the younger set: A Christmas sing along. Kids this young are natural hams and won't think singing lame yet. Especially if they get to use or make instruments like: jingle bells they strung on a piece of yarn to make a bracelet, beans in a cardboard tube, or a simple drum made from an empty can or small box with parchment paper stretched across the opening. Ice cream sculptures of favorite Christmas characters might be messy, but is also delicious and fun.