I like undercovers fairy story about the 'sky man'. Funny stuff.
About the Santa thing, this may come as a shock to some but Santa is in fact NOT REAL. Elsewhere and jgnat are on the right track on this one. You don't enjoy a movie if for every second of it you're reminding yourself that it's not real, even though you know it's not. Children are more than capable of make-believing and enjoying something that they really know isn't real.
Is it cruel to tell a child that Santa isn't real? Is it any more cruel than telling someone that the Truth™ isn't true? It may not be readily accepted, but isn't the real cruelty the untruth?
Let the kids enjoy the fantasy, but don't confuse them by teaching them that Santa is real. Of course, it really should be the parent's decision and not the grandparent's.
Odrade, that is deplorable for someone to tell their grandchild that god is going to kill them at Armageddon.