I think that lying to children is horrible...especially when it's basically blackmail so that they'll behave themselves. I'll try to put more time and effort into raising my children to behave well at all times, rather than allow this imaginary toy-bringer to raise them instead.
I think the whole (modern) idea of Santa is too closely tied to materialism and commercialisation for my liking.
I'd tell them not to tell their friends, because how other parents would want to handle the situation is completely up to them, but I don't think I'd pretend Santa was real.
Kids are pretty smart - I realised there was no Santa when my mam told me his reindeer had smashed a plant pot outside. I was suspicious and asked about it; turns out, it was my Granda. But kids will question these things, and I don't necessarily believe they'll turn out "wrong", whether you keep up the Santa charade or not. It's a lovely, magical thing for kids to believe in, but I plan on bringing them up to be Atheists, so I won't perpetuate a "truth", because then they could question other things, and lose trust in their parents.
I MIGHT tell them the Tooth Fairy is real, though...
