I think all should be allowed to be displayed, to a point/within limits. I don't think that anything negative against another religion/view should be allowed. Also, I don't think anything that would violate school policies should be allowed to be displayed, such as curse words or purposely inciting words/images/displays. If the displays/decorations are done with the intent of just showing your own support for what you believe about the season in a positive manner, then it should be allowed. But if it can be shown that the display is done with the intent of mocking or deriding someone else's beliefs, then it shouldn't.
And, anyone who is offended should have to give a reasonable cause for why their being offended should be enough to remove the display/part of the display. For instance, a person who says that they are offended by Jesus should have to show reasonable cause for why they are being oppressed/harmed by the picture, not just that they don't agree with the message or with Christianity in general. I believe that the intent of the person who is being accused of being offensive is more important than the views of the person who finds it offensive.