We don't necessarily "celebrate" it at our school, but most of the decorations are still primarily Christmas-themed. We do have Hannukah decorations as well, though. We also have the Winter Concert and Winter Break. It's a pretty well-balanced thing at our school, and everybody seems to accept the diversity of beliefs.
Personally, I think that if things like Hannukah and Kwanzaa are allowed to be celebrated, it's just ridiculous if Christmas isn't allowed.