First, empty out all of the shovels, tools and potting soil and store them in the garage or basement. Once your garden sheds are clean as a whistle, you might think about applying a coat of white paint.
You'll be making the garden sheds look like Santa's house at the North Pole, so think cozy and kitschy. Use little figurines (not heirlooms), a footstool, a crocheted throw over the comfy chair and Santa's pipe on a table.
Storage Footstools
If you live in a cold climate, you might want a method of heating. Make sure that you check the capacity of the garden sheds, or run weatherproof cords from the house.
Leave plenty of room on both sides of Santa's chair for little ones to move around. If there is not enough natural light in your grotto, don't worry. Santa can step outside for his photo op, or you can retouch later.
Depending on how many neighborhood children and relatives are going to visit, you might want to put a really comfortable chair in the center of the grotto. Perhaps you can find a man with a real beard and white hair to play Father Christmas. You'll also need a Mrs. Claus, with an endless supply of cookies and hot chocolate (or hot toddies).
The family should draw lots for who gets to play the elves, or just let the children do it, if they are game. Don't forget to make reindeer costumes. You'll need lots and lots of candy canes. A mailbox set up in front of garden sheds to receive letters to Santa is a nice touch.
When everything else is done, you can hang a curtain of white icicle style lights across the doorway to form a curtain or archway. Add mistletoe at the top.
Here are some options for both high and low priced decorative touches, depending on your budget, the size of the garden shed and how elaborate you want to get:
Potbellied stove vs. chimney painted or taped to the wall
Large, elaborate vs. small artificial tree
White icicle style electric lights vs. silver and blue tinsel sheets
Store bought ornaments and decorations vs. homemade ones
A real sleigh done up to look old-fashioned vs. a cardboard one Real wreaths vs. fabric or paper ones (It's very easy to make a braided wreath out of 3 kinds of fabric)
Plexiglas frozen pond vs. a pile of real or Styrofoam snowballs
Safety tip: Do not use real candles. Use electric ones.
If you're rigging up the garden sheds to surprise the kids, come up with a few extra surprises, like a beloved relative or family friend popping up, a special edible treat or a phone call from Santa saying he's on his way. You could also prepare a Christmas themed treasure hunt, such as "find the reindeer." Put on some holiday music, heat up the cider, make reindeer footprints on the shed roof, and you're ready for Christmas Eve.