We live in a cynical world (I had those thoughts too), despite the best efforts of the Santa Claus franchise. But I think on balance we are right to do so. Be wary of strangers...even those that appear kind and nice...but it's okay to go and sit on the knee of an elderly man wearing a face covering once a year, pretending to be a saint?
Much as I've always enjoyed the Santa thing since my own childhood, through my children's childhoods, and now their children's, I think perhaps it needs re-evaluating, much as it saddens me to say it. On the face of it, the story above is a heart-warming one, that perhaps should epitomise the spirit of Christmas, which I'm sure it was intended to do. But the fact that it's elicited cynicism and suspicion instead (and certainly, even at face value, whilst saying we should never lie to kids, this guy was doing it all the way down the line) is a sign of the times, and although sad, not necessarily unhealthy.
I'd stop short of saying "ban Santa!" (I haven't the same hesitation over fireworks - you can ban the Hell out of those!), but I suspect that might happen over time anyway, and it's already 'policed' in most societies these days (I think the knee-sitting is verboten now), and I see far less use of Saint Nick in television advertising at Christmas. I just hope and pray that it doesn't finally happen due to the actions of any rogue Santas affirming our reasons to be cynical a suspicious.