Amber,
The truth is, your little one will think every day in the Magic Kingdom during your visit is Christmas Day!
Unfortunately, Christmas Day is in fact the busiest day of the year at the Magic Kingdom, typically reaching full capacity. Yes, they actually close the gates! To be honest, I just don't like taking a small child into that situation. It is not unsafe, but it is more chaotic than I like to have on vacation.
I would suggest that you try another park that day, or perhaps even enjoy a day at your resort. As for some specific ideas for the youngest children, I would start by reviewing some of the items listed on this page at the
Walt Disney World website (I especially like the maps!).
After you look through them, write me back with a few notes on things that your 2 1/2 year old likes at home, and maybe I can come up with more specific ideas for him.
Have a magical vacation!