Ok, I went up and played for 5 minutes to come up with this for you. Since I do not have kids, and the dog is sleeping and wouldn't cooperate, I was forced to use my tree and a few Santa statuettes.
The way I see it, you have at least 3-4 options (likely hundreds, but hey, lets not go too nuts yet).
1 - First option is that you have all natural lighting and some VERY patient kids that are able to hold a pose motionless for several seconds. If your aperture is quite closed, you will get a good depth of field and the results are like this (pardon the background, its daytime when I took this... curtains were closed, but still... its for the concept, not for a critique).
Note that the "family" and the tree were all in focus and the smaller the aperture, the bigger the "sunburst" effects will be on the lights from the tree. This picture will take the LONGEST and may be the hardest for you to achieve.
2 - Again, all natural light but this time you are focusing tighter. The aperture is open a lot more. Forground is in focus, background is blurred:
Becuase the aperture is opened a lot more, you need to make sure that all the poeple that you want in focus are very close to the same distance to your lens. Anything in front or behind will be blurred (as you can tell by the tree in back). This picture will be a bit easier to take, becuase the aperture is near or at wide open, the time it takes to make the picture drastically drops.
3 - This is the one that if you take some time, will likely get the best results with. Here you are using a flash, but it is off camera. You are going to want to make sure that your shutter speed is at the flash synch speed (between 200-250, depending on the camera). That means that motion is frozen a lot easier, the picture takes a very low amout of time to capture, but placement of the flash will determine how well everything is exposed, and you will also have the luxury of playing with the aperture to decide if you want the tree and kids in focus *or* have the kids in focus and the tree blurred and even by how much.
With this effect, if done properly, your kids will be highlighted well, the tree in the back (because the flash is not shooting at it) will display the lights beautifully and the effect could be very special.
Lastly, I try not to raise the ISO unless I really have no other choice. The higher the ISO, the more you introduce noise or a graininess to your pics. Do it if you have no other choice. However if given the choice of blurry kids or a slight increase in noise... choose the noise!
Overall you have many options. Let us know which one you shoot and how it comes out... I look forward to seeing the results of your work.
Good luck!
....so who knows what will happen. Thank you again!!!
