We have explained Santa as a dress-up game that is played at Christmas. So far there hasn't been any conflict about it - after all, children of this age are often quite immersed in all kinds of play. So "revealing santa" is not any different from going to other children pointing out that their doll is not a real baby or that the motor noises come from their mouth and not their car. Most children wouldn't do that either, as it is more fun to be in the play than to spoil it.
I wouldn't make it a general lesson about faith and religion, but that is just a matter of opinion. VeryAround where I live, very few people take Santa religiously, so mixing it - it's more just about consumerism and gifts. Mixing that with religious belief would just add confusion.