Aussietravellers you just reminded me of the other option...Austria and Switzerland, places where we've not been to before. Would love to hear more about your Christmas experiences in Zermatt. The Matterhorn has caught my eye! Would love to see the original. Do you have family there? What do you actually do on Christmas day? Are you a skiier? Sorry for all the questions!
Zermatt is absolutely divine. Don't have family there, but every trip, my whole family goes. We usually do separate things before, then meet at Zermatt for Christmas.
We always stay at a hotel called Hotel Schweizerhof and it's great. On the main street, just up from the station. There is a fantastic park behind for ice skating and tobagganing. With the hotel it comes with half board (or is that full board, what ever it's called). So includes breakfast and dinner. The hotel its self has 4 restaurants. The main dining room but you can change your dinner booking to any of their other restaurants. There is a swiss fondue style restaurant, a more upmarket thai restaurant and then their cafe I guess you would call it. Its got traditional swiss meals (mmm, Zurichoise with rosti, my favourite meal), but breakfast is always in the main dining room. Their big main Christmas thing is Christmas Eve. They have a big formal dinner in the main dining room, (we can never be bothered to take tux's etc, so we just eat in one of the other restaurants). The owners of our hotel also own a couple of others so Christmas Eve afternoon they have a massive Christmas tea party for the kids. It is at a beautiful hotel up the road and although we go dressed smart, many are dressed in suits and the kids very very formal. At the party (which we don't pay for, you get an invitation from the hotel a couple of days before), you sit at set tables and served afternoon tea. The kids are all called up individually, by name, to see Father Christmas and given a gift from him. Many children also perform a poem or sing a song (DS is too shy and has never done that).
Christmas day is a little strange. We usually do presents in one of the rooms (my whole family goes), then go down for breakfast. I always take predecorated christmas trees that I have bought from the $2 shop, one for ever room and we just leave them there when we go (then gives me room for my shopping). And it's just a normal day, the shops are open, ski slopes are open. We go out for dinner at the Italian restaurant (which is now thai) usually in our hotel for our Christmas dinner. Christmas day, things seem to be open as normal.
Some of my family go to church, there is an anglican church (I think that is what it is), there is like a late night Christmas eve service, then services on Christmas day too. They say it's beautiful.
I do ski, but didn't last trip. I did go up the mountain though and watch everybody else and met them for lunch. They also had an instructor too. The skiing is fantastic, different mountains to go up, usually by train.
We went from Paris to Zermatt last trip. We took the TGV from Paris to Lausanne (took a few hours, amazing views too through the french and swiss countryside). From Lausanne, train to Visp. Change train again from Visp to Zermatt.
Here are some photos from our last trip.
Train from Visp to Zermatt
Main Street Zermatt
Natural ice rink behind our hotel (there is also a man made where they play ice hockey)
They have these fantastic penguins that you hold (usually the kids but I use them too
) the penguins help you balance as there aren't any sides on the natural ice rink.
Had this furry guy on the train with us on the way down the mountain from skiing one day
Up the top of Gornergrat (one of the mountains you go up to ski), not a bad view as you ski and ride the chairlifts.
Another view up the mountain after lunch
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Oh your trip sounds amazing! woo hoo 
