Absolutely, do Fantasmic the week before Christmas rather then Christmas week. There are extra shows at that time of the year. The early show (first show) was the only dinner package show available. The later shows didn't offer that option. I feel you have to eat anyway; so, if the package makes it easier why not? If budget is a concern then just try to get the most reasonable meal and dine at the most reasonable place.
There's a big difference on crowd levels between the week before and the week of Christmas at Disney. Some schools get out earlier depending on when Christmas hits. Make sure you go early in the week for Fantasmic. It's not empty but it's definitely better to do it pre-Christmas week.
Also, it may be alright to take the little one if you go with the dinner package. If you go to the early show with the dinner package it may work out. The meal cost may be offset by the babysitting costs. It's not cheap getting a babysitter at Disney, either. If you have someone you know with you for this chore then it doesn't matter as much. Sometimes, an infant will sleep through the whole show. Find a good place to sit with the stroller.
Don't forget to save up for Mickey's Very Merry Christmas Party.