Sad little story, all around.
I certainly would never even think to tell a classroom full of five-year-olds that there was no Santa. That seems too, cruel, and a job left to the parents or (most likely) other kids. I hung onto my belief in Santa Claus, the Tooth Fairy, and the Easter Bunny as long as possible. I hung on, sometimes, in spite of evidence to the contrary. Why? After all, it did open me up to (extra) ridicule from my classmates. Well, I hung on to those beliefs because they were magic, and I wanted to have magic in my world. I wanted (and still want) faeries and ghosts and kindly saints that bring gifts. I don't think there is anything wrong with wanting magic.
On the other hand, I don't think that having Santa visit the class to convince the kids of his realness is a good idea either. Some people argue against Santa et al because it is lying to children. I don't agree with that view, but I do think that once the jig is up, saying "No, seriously, he does exist. Really, believe us. Look." is a bad choice. Fool me once, shame on you, fool me twice, shame on me. I doubt many kids, after the initial disillusionment felt that they had been wrongly decieved (I know I didn't). However, the second attempt does come across as blatant lying. Disillusionment is sad, but you have to move on. You can't prop up that sort of magic once it has fallen; it is too fragile.
If I ever have children, I would like for them to Believe as long as they can. I think the Santa Lucia tradition is a good one to help the transition. If the oldest girl has always been Santa Lucia on the 13th, it makes more sense when you discover that mom and dad have been "St. Nick" and Santa Claus on the 5th and the 24th. A little magic for everyone.