I agree with Carla that Hanukkah isn't supposed to be about presents, but we live in a country where the majority is celebrating Christmas with conspicuous consumption. Unless you don't mind your kids becoming bitter resentful adults like me, there's no easy way to convince your kids to forgo presents for the sake of moral/political/religious purity when all of their friends will be brandishing brand-new toys.
Seen through the eyes of a child, not receiving gifts for Hanukkah equates to not being loved. For me and my arrested development, I struggle with this as a gift-giver. I want my son to know I love him and that we made Hanukkah special from the pictures we show him one day. I know that I've over-compensated by drowning him with birthday and Chanukah gifts, and I risk spoiling him if I keep it up.
On the other hand, I simply can't take the moral high ground like Carla because I don't enjoy the benefit of having a large number of family and friends to give my son presents in my stead. If I don't buy Aiven any gifts, he won't have enough for each night of Hannukah. I admire Carla for having the courage to buck convention and celebrate Hanukkah with her own family's traditions. Her list of suggestions of what to do each night looks both fun and educational. If I could add just one thing, it would be to convince your kids to donate all of their new presents, or any old ones in good condition, to tzedakah. That would truly be a beautiful lesson to teach your kids. Let me know how it goes. I have some more shopping to do.