"Fairytale of New York" by the Pogues (featuring Kirsty MacColl) is my favorite holiday tune, tied with "Christmas Wrapping." I think "Fairytale" encourages the highest-quality covers of any seasonal song too. Evidence below.
Billy Bragg and Florence and the Machine (via Slicing Up Eyeballs):
MP3: The Pogues and Kirsty MacColl, "A Fairytale of New York"