J.R.
Speaking from experience, I wish that I had asked this very same question 20 years ago.
I have found that you BOTH must honor what you individually believe, so if that means 'celebrating' both Christmas/Hanukah, then by all means somehow find a way to honor and acknowledge the religious parts of each of you. It needs to be done from a deep level of respect for one another. I do not recommend ignoring or avoiding 'the holiday's' as this leads to resentment and wrong assumptions over the years. I scaled back my beliefs and holiday spirit for many years to allow room for my husband beliefs. I have nothing but regrets about this decision now. I have learned over the many years that culture and traditions are primarily passed on through the mother and her organization of the house and holiday's. Men don't contribute as much to these events. They show up, eat, drink and obligingly socialize. They pay for it all (when you're a SAHM). For the most part, YOU will be setting the tone in your own home.
With that said, I'll be direct, I do not think it fair of you to change your mind AFTER having children when you have been going along with your husband's 'huge' family celebrations without objection. These are discussions and decisions that couples should navigate through together. I think it would be a beautiful experience for your children to see their mommy honoring her faith and at the same time lovingly support her husband. In the end, what is more important? Loving and accepting one another and ultimately getting along. I don't think your children will be confused if religion is practiced as a deep sustaining faith and not some 'right' or 'wrong' choice.
Peace be with you as you live your decision.