Kenny the Pirate has a great breakdown for the parties, and I agree if you want to meet the Dwarves you basically want to be in line by 5:30. What to do depends on what your priorities are. We love to eat, but we're there to Christmas Party. For us that means characters, rides, and shows are icing on our cake (& yum! Cake!)
The lines for food can be VERY long depending on when you eat. They get lower as it gets later and around fireworks. There's a ton to do and it is impossible to get it all in one night. We try to do a few parties when we're there because we love them. So we book an early (4:30ish) ADR one night and then try to be in line for important characters relatively early. The next time we go might do an early hotel ADR like 'Ohana or 1900 (we nap in the afternoon before the party) and then hit the rides and any characters we missed (Dumbo during wishes is incredible!). We do the dessert party another night and then some rides and any last characters another night.
My mistake last time couldn't be avoided. We had all our ADRs set except one. Kiddo was desperate to go to Garden Grill to see her beloved Chipmunks and the only time I could get was 6:00 on a party night. Great, I thought, we can just hop right on back to MK after dinner. Getting there and dinner was fine. Getting back was a hot mess. Epcot was super busy with everyone leaving MK and arriving from other parks, the monorail was stuffed and delayed (had I known, we should have cabbed it), and then getting in the gate was a hot mess between what was going on, everyone entering, a sea of people leaving (many not happily), and everyone inside then standing to hold their place once we finally got in. It took us forever to get through. At one point kiddo (then 3) started to get crowd panicked and I brought her to meet Tink just to keep her calm and because we couldn't get through. Eventually we did, but I swear I will keep it as simple as possible from now on! So in the keeping it simple plan, early dinner at the MK and then you're free would be the absolute easiest (LTT if they open, CP, BOG, CRT if you're in a character mind) or as we're in the GF 1900 early. Or mildly complicated is early CM, or 'Ohana.
So the lines especially early on are very long, there are not full choices everywhere. Some stations are closed to give out hot chocolate and cookies (hot chocolate is yummy, the cookies were so bland not even my cookie loving (then) toddler would eat it but spit them out, and there's apple slices and juice too as alternatives). There are places to sit but it can be loud (dance parties), and a divide and conquer plan is always best (you get us seats and I'll grab the food). Our first trip we didn't plan enough and we had lovely timing in that we arrived last in line just as EVERY character was leaving and closed for a break or the night. Our (then 2 yo) kiddo was okay with seeing the characters from afar, but she didn't really understand waving is NOT a meet. Some even came over (probably because she was cute and eagerly calling them as they left) and gave her a kind word, a cheek kiss, or a pat on the head. This last time I did way better in planning.
I don't have all our plans fully finalized right now, but I can share them if I ever figure out the gordian knot I've made between deluxe dining ADRs, fastpasses, Xmas Parties, and a 4.5 yo's fondest wishes and dreams list. Or I'm happy to take a look if someone wants to show.