On his terrific blog (which I freely admit I often struggle to follow), Thomistic philsopher Edward Feser argues that it is wrong to tell children Santa Claus exists. Interestingly, the first comment on the post (not by me, but by someone by the name RP) quotes Chesterton to this effect: "Personally, of course, I believe in Santa Claus; but it is the season of forgiveness, and I will forgive others for not doing so." (GKC)
It seems plain from this, and from the passage I quoted in this post (I'm sure many others could be found) that Chesterton approved of parents passing on the Santa Claus story, or at least did not frown on them for so doing.
Not that I would presume to argue with Edward Feser, and rationally I cannot mount a defence of the practice myself, especially since Feser insists it has been condemned by manualists and Catholic authorities. But it seems a pity to me.