I ran the Santa photo event for the Southlake Town Square several years ago. I have much advise to offer but probably best by phone (817.690.8385). We did $25K of business for five three day weekends with the basic 4x6 photo running $6.95. This was a huge improvement over previous years which averaged about $9500 in sales for the sale time period.
We had a 'no hassle' arrangement so that customers did not have to pay to see Santa and were not obligated to buy anything. We even allowed Mom's and Dad's to take their own photos. My feeling is that if you offer a quality product, it will stand on it's own and people will respond. I don't know have actual numbers for this, but I would guess that well over 80% of people sitting with Santa bought something.
We used 1 CF card per customer, shot as many photos as we could, let them preview them on a Mac monitor and then printed on ink jet (dye sub would be best). We had three Mac workstations going non-stop for most of the time and one additional at peak times and for special work (i.e. large orders, hand cut photos set in ornament frames, etc).
We also offered a flat-fee for all photos on a CD. We charged only $20 for that which was a steal. It was very popular and had me thinking after the event that perhaps that would be the way to go completely (i.e. no on-site printing, just slap everything on a CD for a cut-rate price). I do think that ordering on web is a great convenience that many stressed out Mom's would like as an option. But.. the reality is that many would never take the time later to log on and preview the photos. Even fewer would purchase. So.. your best incentive for a sale is going to be right after the photo is taken.
One other note... I happen to have a complete Santa set and photo shop for sale. I've listed it on eBay three times this year and a couple times on Craig's list. I just sold the stage portion of the set but still have the Photo Store portion and some other misc items that may be of interest to you (giant wooden 6ft Nutcrackers, painted wooden presents, etc). Here is a link to some photos:
http://web.mac.com/cdesign3/
Call if you wish to discuss anything else. I would be happy to provide what info I can. John 817.690.8385