Good job, Para!
The way we approached holidays was a little different, because although I wanted to quit the JWs first, Mr Scully didn't take long to realize that The Truth™ wasn't true. Once we decided that we were leaving the JWs, we did it together and started having quiet celebrations at home with our children. At first we were very cautious about decorating our home and started with seasonal decorations.
Our first Hallowe'en for instance, starting in mid-September to be on the safe side, we bought some Indian corn and made a hanging for the front door, some gourds to put on the steps (not pumpkins!), a bale of hay and a scarecrow to put out front on the deck. One Sister™ phoned me to complain about our Hallowe'en decorations - and I set her straight - that they had nothing to do with Hallowe'en, and it was up to her to prove to me how Indian corn, a bale of hay, gourds and a scarecrow had anything to do with Hallowe'en instead of "autumn". I left the decorations up until mid-November to make my point perfectly clear. Once late November came around and it started to snow, I started putting window stickies of snowflakes and snowmen on the windows, let the kids make paper snowflakes and snowballs, and I put snowmen figurines up around the house. Again, the same Sister™ gave me grief, so I put the ball in her court and told her she needed to prove to me that snowflakes and snowmen were Christmas decorations, not "winter" decorations. The next year, we put white mini lights (Christmas type) around our deck in the middle of summer, for a nice effect when we have a barbecue on summer evenings - how convenient that we "forgot" to take them down.
Maybe you could check out the December 15, 2001 Watchtower's Questions from Readers to get an interesting perspective on participating in holidays in a Religiously Divided Household™ (ie. JW wife, non-JW husband). Essentially, the JW wife in this situation can purchase gifts, wrapping paper, cards, do gift wrapping, make special meals, help decorate, visit non-JW relatives and friends, listen to holiday music, etc. at her husband's request, the only thing she cannot do is participate in acts of false worship. That is so vague that it is laughable, because it opens up to a practising JW the opportunity to do all those things as well, just so long as they do not participate in acts of false worship. And that is a bonus to your family - because you could sit down with your wife and ask her to read that article with you and then discuss what exactly constitute acts of false worship in terms of each holiday. Once you come to an agreement, then you can start small and see where it goes from there. I think your wife wants to have something for the kids so they don't feel left out, and things like that will help the kids not to feel so isolated - in a kind of mental and emotional limbo - where they think things associated with holidays are "bad" simply because they are associated with holidays.
When it comes to birthdays, the way I reasoned it with Mr Scully was that I had read some research that allowing a child to have a special day like a birthday promotes healthy self-esteem, that kids use these occasions to mentally remind themselves that they are important enough to receive love from their family and celebrate the fact that they are alive. We had both seen the negative effects on our own self-esteem from being JWs, and didn't want that for our kids obviously. While the bible does say that one should "not think more of oneself than is necessary", it doesn't mean that we should think poorly of ourselves just to be certain that we aren't "thinking more of oneself than is necessary".
I'm not a huge fan of Dr Phil anymore, but I do like his book Family First, particularly the chapters about how traditions and celebrations are important "glues" for family relationships. When I first read it, it occurred to me that by taking away holidays from JW families and replacing them with meetings, Circuit Overseer Visits™, Circuit Assemblies™, Special Assembly Days™, District Conventions™ and so on, they were (perhaps unwittingly) removing the focus away from family solidarity and putting it on loyalty to the Organization™. The bonds between family members weakens, because Organization™ demands loyalty over family relationships. If that isn't an act of false worship, then I don't know what is. Maybe you could pick that up (I've seen it on the discount rack at Chapters locally) and show that chapter to your wife.
I'm dreading looking out my window - I got to bed before the snow started in earnest this morning. They were calling for 15cm in the Nation's Capital.