Addition: To Popmom and Amanda
I am SOOOO sorry that my post was misunderstood - I in no way meant to make it sound like your 5 year old was rude. (Still trying to find your feeling that in my post.) Using this as a teachable moment to explain that we are always grateful for a present, no matter what the cost does not mean that a child was rude. Regardless of how my children act when they receive a present, if we see this kind of disparity, I always talk about this to them. They are teens now, and I'm grateful I have. Seeing wealthy neighbors give their kids BMW's and small Mercedes is not hard on them now because I have had this talk with them for many years.
I did not know that Santa was at the party - you had not said. I'm sorry your child was hurt. I am all for letting kids keep believing the magic of Santa, and it seems that given Santa was there, you were caught between a rock and a hard place - you did nothing wrong. I would not have mentioned that the gift was from you, given that Santa was there.
Original:
You really do need to talk to your 5 year old about understanding the difference in "Santa" gifts and gifts from Mom. Santa gives gifts for under the tree on Christmas morning, not at the neighbor's. Tell her the instructions you got and that the other moms evidently decided to ignore those instructions.
THEN, Popmom, have a talk with your daughter about the way she talked to you. It is a teachable moment you should not lose to explain to her that ANY gift she receives should be appreciated, no matter how small. You say you are a lousy mom because of the small gift - that's ridiculous. What would make you a lousy mom would be if you let your daughter grow up to think that she is "entitled" to gifts of some magnitude. How would you feel if she said this to someone else? Awful, really. So teach her how to act when given a gift. Every time she is given something, every time.
All my best!
Dawn