Kyle is playing Joseph of Nazareth in the South Park Elementary School's Christmas nativity play, but he is forced to quit when his mother hears of the play and expresses outrage that her Jewish son is being forced to participate in a Christian production. She demands that the religious elements be taken out of the public school, and threatens to take her case to the mayor. Kyle instead suggests he sing the "Mr. Hankey, the Christmas Poo" song as a non-religious substitute, but he is rejected because nobody else believes in Mr. Hankey. Kyle leaves the school feeling lonely and outcast because he cannot celebrate Christmas with everyone else.
Mayor McDaniels decides that anything offensive to anyone will be removed from the Christmas celebrations, including Santa Claus, wreaths, trees, stars, lights, candy canes and mistletoe. Kyle once again tries to suggest that they use Mr. Hankey, the living and talking Christmas fecal matter, as a non-religious Christmas icon since he doesn't discriminate against anyone. At home, he is scolded by his parents for believing in Mr. Hankey. However, while Kyle is brushing his teeth, Mr. Hankey actually comes out of the toilet, spreading feces stains everywhere he goes, prompting Kyle's parents to blame Kyle for the mess. Kyle decides he will bring Mr. Hankey to school to prove he is real, but this only causes more problems as Mr. Hankey leaps at Cartman's face as he sings "Kyle's Mom is a Big Fat Bitch" and Kyle is blamed. He is sent to talk to guidance counselor, Mr. Mackey, but Kyle only gets into further trouble when Mr. Hankey takes a bath in Mr. Mackey's coffee. Cartman, Stan and Kenny believe Kyle is insane and check him into a mental institution.
Like the whole town, the school Christmas pageant is stripped of all symbols of Christmas, and the children instead present a minimalist song and dance created by composer Philip Glass. The parents, astounded by how awful the pageant has turned out, begin blaming one another for destroying Christmas and a fight breaks out. When Chef finds out where Kyle is, he reveals to the children that Mr. Hankey does actually exist. When all the children start believing, Mr. Hankey finally reveals himself to everyone and scolds them for losing sight of the good things of Christmas and focusing on the bad. The townspeople release Kyle from the asylum and apologize, then they all sing Christmas songs and watch Mr. Hankey fly away with Santa Claus. Cartman, Stan, and Kyle feel that something is still missing. "THE END" then appears, and Kenny is excited and relieved that he has survived the entire episode without getting killed in spite of being dangerous situations throughout it. During the end credits, Jesus sings "Happy Birthday" to himself alone in his television studio.
- The entire episode is a parody of Christmas specials, right down to the music sounding somewhat (especially the Mr. Hankey song) like songs from other holiday specials.
- The opening sequence to the episode is a direct parody of A Charlie Brown Christmas, right down to Stan's monologue about Christmas. When everyone goes to get Kyle out of the insane asylum, they all shout "Merry Christmas, Kyle Broflovski!" in the same way everyone wished Charlie Brown a Merry Christmas at the end of A Charlie Brown Christmas.
- Further, this episode is a commentary on what seems yearly and constant debate on how to make Christmas non-offensive to other nationalities/faiths. In their typical style, both sides of the argument are shown going to ridiculous extremes.
- Sheila Broflovski complains about Kyle playing St. Joseph. However, Joseph was in fact Jewish, making the casting rather appropriate.
- Kyle's mother confuses Joseph of Arimathea with Joseph of Nazareth. Joseph of Nazareth was the adoptive father of Jesus Christ, Joseph of Arimathea—depending on what gospels you subscribe to—Was a rich man who donated his own prepared tomb for Jesus after he was crucified.
- Mr. Garrison accuses Sheila Broflovski of raising Kyle up as a Pagan. Modern day associations aside, this is an accurate term which was used as blanket term denoting any religions that were founded prior to pre-Christian Europe.
- This is the first time Mr. Garrison suggests they get rid of all the Mexicans. He suggests it again in It's Christmas in Canada, to which the Mayor, in annoyance says "Every year you suggest that, and every year we tell you 'NO'!"
- Of all the things that people in South Park decide to remove from the Christmas pageant include mention of Frosty the Snowman.
- This episode includes a live action parody commercial advertising a make-your-own Mr. Hankey kit. It parodies many toy commercials, and the Mr. Hankey toy has similar properties to a Mr. Potato Head toy.
- Stan is getting a John Elway football helmet for Christmas. Elway was quarter back for the Denver Broncos. He played in the NFL from 1983-1998.
- Interrupting the end credits is a scene where Jesus is sullenly wishing his birthday to himself. This is a symbol that people usually forget what Christmas is about: Commemorating the birth of Jesus.
- Philip Glass is a modern composer for orchestra's and film scores. Often credited as the innovator of the 'minimalist' style.
- King Kamehameha referenced in Cartman's song about Sheila Broflovski was the greatest of the Hawaiian kings.
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