M.M.
In our house every gift that Santa can get has to be approved by me and it has to be within budget. I tell them that Santa has to use my money to get the things since he doesn't make them anymore. So when they ask for outlandish toys I can't afford, the Wii, then I can just say well since I have to let Santa use our money at the store I don't think that one is going to happen. ALso they are allowed to ask for one gift from the mall Santa.
We donate a shoebox to Operation Christmas Child and to Toys for Tots and I simply say that some families don't have the budget that we do and this is a way for us to help Santa get the toys the kids want. They get a big kick out of going to get their toy for Toys and Shoeboxes filled and have never questioned any of it.
Even as my two oldest have grown out of Santa they want to keep doing a shoebox and make sure they get the right toy.