Hmmm...I had nearly decided on McD's simply because up until my most recent reading no one had suggested it was a bad idea. But, I now I read a few of those...
DH and I even talked about it last night. He said he had decided on Target, so I presented the ideas here and suggested McD's.
I don't want to get a variety (although that might be ideal in some ways) but I see problems with 1. quick distribution (we will have the "goody" bags with the GC's premade and the elves will quickly hand out a bag). 2. What if more kids want a particular one and they get "stuck" with the one they didn't choose and others got their pick. I just want to keep it simple.
I know no matter what I do there will complaints when there are so many people involved.
We have 2 goody bag types. One for kids 5 and under and one for kids 6 to 12. The bags are nice Christmas craft bags I got from Party City (B1G1) and cost 25 cents each. Tissue paper for each. We had to put a little junk in them. All have a small bag of animal crackers, 2 candy cans, 1 lifesaver gummies, 4 or 5 Hershey kisses and "magical reindeer food". The under 5 have holiday bubbles and a decorate the snowman sticker sheet. The 6 to 12 years old have a bouncy ball, pencil and junky pinball game. I'm donating the reindeer food so the bags at this point cost about a $1 each. Add the $5 GC and we are under budget (money to use for next year

). I think those seem like nice enough gifts.
Using $5 bills would make it easier on us, plus we wouldn't be stuck with leftover GC's (DH and I will reimbursed only for GC's that are used). I just don't know about Santa giving out cash. I'll have to think about that one.
In response to other questions...
We don't have a 5 and below around here--people from other areas might, though. But, it would be hard for me to GC's.
It is a military function, so it is secular. We try to stay more with "generic Holiday or Winter" theme, but Santa is there --so it isn't truly without a Christmas theme. I have never been to a military kids Holiday function w/o Santa. All religions are of course shown great tolerance and usually there are references to other Holiday symbols. I don't think there has ever been a past problem with this set-up. Saturday drill will be a long day. Soldiers use Sunday drill to do some of their basic drill activities and on ths day their families can attend. There is a nice lunch (catered), music, Santa, and back to some business (kids activity room is available), awards and some promotions are presented and there is a Family Readiness Group meeting.
As far as my part in the planning. It did end up being more than the goody bags. This is one of DH's additional duties, but he is not a party planner...I don't know how he thought all of this would magically come together. His idea was he would work on it the day before

. He did have a budget developed, a caterer hired and the basic operations (very vague) delegated to different sections. Lucky for him as most Dis members I am a total type A planner. I developed "to do" lists for each section and purchased other necessary supplies. Luckily, there are a lot of people willing and able to help out as long as they know what they are supposed to do.
My goal is keep it simple, stay on or under budget (otherwise it is out of our pocket) and please most people. I want everyone to have a good time.
Thanks to all for your suggestions and advice.