The Homestead is nice for Christmas. They have lots of fun activities for kids.

Could you do a house-swap? I did some last summer and it was fantastic. "Rented" a wonderful house in New Hampshire on a river...

To stay within your budget, I recommend staying within driving distance, as previously suggested. Maybe go out a little west toward Shenandoah valley and rent a cabin? Try airbnb.com!

Definitley drive and rent a house/apartment - so much easier than fly/hotel/restaurants.

What kind of holidays/activities do you and your kids like?

I second Deep Creek suggestion.

What about Deep Creek? For only $2000 you would have to get a small-ish house and the kids would have to all share rooms, but who cares? Its' close and you could do some winter activities.

Would Great Wolf Lodge be too kid-intense for you? There would be the novelty of an indoor swim park for the kids and Williamsburg VA is gorgeous in the christmas season. You could even take a day trip to Virginia Beach.

Anonymous wrote:How about renting a house in Lancaster County and vising Amish country and surrounding attractions?

http://www.padutchcountry.com/activities/lancaster-attractions.asp

Could include a trip to Hershey Park (although obviously the amusement park will be closed, but isn't there still a tour?). If there isn't enough to do there, then you can finish up with 1 or 2 nights in Philadelphia to see the kids museums there (maybe don't stay in the city but at a motel outside of the city to save $$).

Hershey Park and Dutch Wonderland both have Christmas hours. We went last year - DW was great, HP was a complete zoo, and they're only open at night so it's COLD. But it's still fun. There's a ton of stuff to do in and around Lancaster - there are the train museums, there's a children's museum (we did not make it to that, so I don't know how good it is), there's the Turkey Hill museum which is kind of not great, but the kids were amused by it. If you can stay in a hotel with an indoor pool, that's always fun. (Eden Resort is nice, as is the Doubletree with a bigger indoor water park)

Do something within driving distance and rent a house or condo for a week - you could make it work on your budget. There is a lot to do within driving distance - so I would say it depends on your families interest. Ours (even in the winter) prefer outdoors events so we'd be more likely to go mountains, skiing etc but it can be so mild around here that you could do something that involves bring bikes and other things for hikes.

You could totally do a warm weather Christmas vacation if you drive and rent a vacation condo for the week. It's an expensive time though, so to save money you might look at luxury developments with a nice pool in southern Florida (for the warmer temps) that are NOT in Orlando (because then you'll want to do Disney and blow your budget) nor right on the beach (competing with snow birds & $$ families who hit the beach at Christmas.) Something like on the outskirts like Lely Resort near Naples, or Deerfield Beach. Maybe you could do a house swap with a Florida family that wants to come up north to visit relatives at Christmas time? or just search really hard for an oceanview condo partial week in Sanibel?
If I am going to rent a cabin during a snowy week, I am going to want a jacuzzi or hot tub, and to ski, which is pricey for a family. But if you mix it up with other activities like at a state park (XC, skating, snowshoe hikes, quaint town activities, pancake breakfast and snowball fights, snow fort building, collecting firewood) you could have a magical time. Maybe something near Snowshoe (Davies WV) or Timberline. Massanutten has an indoor water park and a small ski/tubing area. Lancaster Pa has the train museum, toy train museum, Dutch Wonderland, Amish attractions, kid's play museum, Hershey at Christmas nearby (the Hershey Theater is gorgeous btw) and not far to Gettysburg/Liberty for sking WITH daycare.
Williamsburg is also nice especially if it's not too cold or snowy, lots of outdoor trails, indoor museums, hotels with indoor pools, and a bouncy house place just north of town. Check out other stuff in Newport News (USS Monitor at the Mariner's Museum), Virginia War Museum, Virginia Air and Space center, Virginia Living Museum, Fort Monroe etc., hit the spa for a day while the kids play indoor games, and you have a very full week.

How about Atlanta, GA?

I just checked and there are several Residence Inn's there that are under $175/night and will accomodate your family of 6. We are also a family of 6 and like to stay at Residence Inns a lot.
I don't know much about Atlanta so maybe someone else could advise you on which ones are in the nicer neighborhoods or whatever.

If you can stomach the beach, obx would be great option for that price range.

How about renting a house in Lancaster County and vising Amish country and surrounding attractions?

http://www.padutchcountry.com/activities/lancaster-attractions.asp

Could include a trip to Hershey Park (although obviously the amusement park will be closed, but isn't there still a tour?). If there isn't enough to do there, then you can finish up with 1 or 2 nights in Philadelphia to see the kids museums there (maybe don't stay in the city but at a motel outside of the city to save $$).