This is nothing new in this part of the world. My niece is 22, and when she was in grade school her public school -- in north central Illinois -- allowed kids to sing Hunnakah and Kwaanza songs, but banned Christmas carols.
Ridiculous. I'm all in favour of inclusion of other peoples' traditions and religiions - Hanukka etc (although I've got my doubts about the made up holiday of Kwanza), but shutting out the traditions and religion of the majority is silly. I grew up in a place (Nova Scotia, mostly) and era (born in '67) where the culture was pretty homogeneous and there was never really any question about the appropriateness of having a Christmas pageant with the Christmas story and songs, including the religious ones. Certainly I never heard my father say anything against it, and he was quite agnostic. But today we've got all these twits who are determined not to offend anyone of a different belief, despite not having any idea what they might find offensive or not.