The liberal Arabic website Elaph.com recently reported that the Mufti of Washington D.C., Sheikh Muhammad Al-Hanooti, prohibited Muslim children from having their photos taken with Santa Claus, as this is a" sin" and "an abomination" that contravenes the tenets of Islam. The site emphasized that the Mufti's position does not represent the view of most Muslims living in the U.S., and that the imam of a mosque in Maryland has even urged Muslims to celebrate Christmas along with the Christians as a means of promoting their integration in American society.
The issue of Christmas celebrations has been a bone of contention among Muslims in Australia as well. Australian sources reported that Sheikh Yahya Safi, the imam of Australia's largest mosque, the Lakemba Mosque in Sydney, has ruled that Muslims must not extend Christmas greetings to Christians. The Mufti of Australia, Ibrahim Abu Muhammad, said in response that these were irresponsible statements and that Islam respects other religions. 
The following are excerpts from the Elaph article:
Washington Mufti Sheikh Muhammad Al-Hanooti: Taking Pictures With Santa – An Abomination
"Muslim children's affection for Santa Claus could have been an opportunity to prove that [the Muslims] are part of the multi-cultural social fabric of the U.S., after [some] other groups in American society have accused them of a tendency to isolate themselves socially. American-Muslim parents hoped that this year's Christmas celebrations would break the ice between their children and their Christian friends...
Sheikh Muhammad Al-Hanooti
"[However], Sheikh Muhammad Al-Hanooti, the Mufti of the Greater Washington [area], regards the Muslim children's affection for Santa Claus and their [desire] to be photographed with him in the squares and malls [of the city] as a deviation from the right path and as [an act of] ignorance and sin... [He said:] 'We Muslims do not believe in celebrating non-Muslim holidays. It contravenes the Muslim way as spelled out in the Koran and the Sunna... Photographing Muslim children with Santa Claus is an abomination; it is a sin and a deviation from the correct path, and it constitutes a call to assimilate into the Christian faith and a contamination of the Muslim faith.'
"Sheikh Al-Hanooti, who immigrated to the U.S. over 34 years ago, refrained from proclaiming that the children who take part in Christmas celebrations and extend [holiday] greetings to Santa are infidels: 'I am not saying that they are infidels. They are like a person who drinks wine. It is [an act of] insubordination, sin, ignorance, and deviation from the right path...'
"[It should be noted that] Sheikh Al-Hanooti's view... is not supported by the Muslim community [in the U.S.]. Amani Ahmad, who has been living in Virginia for three years, took her three children to the big mall to see Santa Claus and have their pictures taken with him as a keepsake. She said: 'I do not see [the act of] taking pictures with Santa Claus, whom my children love, as something that contravenes the Islamic faith. It makes my family happy...'"
Imam Of Maryland Mosque: We ShouldCelebrate With Our Christian Brothers
"Sheikh 'Abd Al-Jalil 'Issa, the imam of a mosque in Maryland, advocates rapprochement between American Muslims and the sectors in American society that celebrate Christmas. He told Elaph that Sheikh Al-Hanooti's statements were irresponsible, 'because Allah emphasized the greatness of Jesus in the Koran, so we must join our Christian brothers in celebrating his birthday...' 'Issa, who came [to the U.S.] from Ghana, went even further. He thinks that 'attending mass with the American Christians is a positive thing, as long as one does not take part in the ritual itself.'"