To start off, you'll need to head to Windurst, Bastok or San d'Oria. (If you don't care which town you get your Santa Hat aka Dream Hat from, I would recommend Bastok or San d'Oria, Windurst has way too many children NPCs.) From there, talk to the Holiday Moogle (see list of NPCs below for each NPC's location). The moogle will tell you that there are some children looking for an adventurer to do them a favor. The moogle will then tell you the location of these three children, for example "One in Windurst Waters...Two in Windurst Walls, and...None in Port Windurst..." - the Moogle will then suggest you try helping them out. (But if the moogle finds out you've laid a stinking/grubby/slimy finger on them...)
Next, unless you have an excellent memory, get a pencil and paper. You'll need to write down what letter each child gives you, so that you can report it to the Smilebringer. From here it's just running around to the children in the zone the Holiday Moogle has suggested. When you talk to them, eventually you will receive three letters, a Letter of Joy, a Letter of Gratitude, and a Letter of Thanks. Head to the Smilebringer, and trade him/her all 3 of the letters at once. They will ask you the name of each child that gave you the letter. If you choose correctly, you'll get a Dream Hat.
Now that you've got your hat, go ahead and put it on so you can bring joy to the kiddies of Vana'diel. Talk to the Smilebringer again, and she/he will give you one Kiddie Present that is EX. Talk to the Smilebringer again, and she/he will offer to sell you presents, ranging from 100 gil to 1200 gil. Now go find some kiddies and trade them presents. The more you trade presents with the kiddies, the more your Holiday Fame will go up. You can check your fame at the Moogle (fame messaged below), who will also offer to warp you to other cities. NOTE: You need Holiday Fame Level 3 in order to use the city teleport; if your Holiday Fame isn't high enough, the Moogle will suggest you try spreading more holiday joy. You want to trade presents to many different children to get Holiday Fame, not just to one child. Children can also not have any more room for presents.
Now head off to get your tree. There is a Tree Maker in the Port of each city. They will ask you to bring them back goods from the Market Moogle. There is a Market Moogle outside the residential section of each part of town. The NPC may ask you to retrieve goods 1, 2 or 3 times from the various Market Moogles, depending on how quickly you do it. After the NPC is satisfied, you will receive the tree for that nation. You can do this in each of the starting cities to recieve all 3 trees; Bastokan Tree, San d'Orian Tree and Windurstian Tree. You can only do one tree quest per Vana'diel day.
To get your Dream Hat +1, you will need the maximum Holiday Fame and to have at least one tree in your Moogle House. At some point, your Moogle will tell you there is a Special Present under your tree. Use this like a firework, and you will find a Dream Hat +1 in your inventory.
Also, if you've completed the tree quest for your city, you can earn fireworks by getting more materials for the Tree Makers, once every game day. They will ask if you want to get them more supplies, and of course you'll say yes. If you don't run to the moogle and back quick enough, you will get nothing! But, if you do it quickly, you'll be given fireworks:
Tree Talker : Good work, missy.
Here's your reward.
Obtained: 3 brilliant snows!
Clear time: 3 minutes 45 seconds.
The current clear time record for "the Bastok Markets course" is 2 minutes 15 seconds.
The firework you receive can be exchanged to the Outpost Teleporter in that nation, 10 at a time. In exchange, you will be allowed to teleport to any outpost, regardless of who owns the region or the level of the character.
NPC List
Smilebringer:
Cristina, Bastok Mines (I-9)
Charmealaut, San d'Oria North (D-8)
Atagei-Portagei, North Windurst Waters (F-5)
Tree Maker:
Tree Talker, Port Bastok (L-7)
Farmaoquaix, San d'Oria Port (G-6)
Rhi Perejha, Windurst Port (B-5)
Holiday Moogle:
Moogle, Bastok Markets (G-8)
Moogle, Windurst Woods (K-10)
Moogle, Southern San d'Oria (J-9)
List of Children
Bastok Port:
Dehlner, Kaede, Rex, Rin, Valah Molkot
Bastok Markets:
Arawn, Brygid, Enu, Gwill, Rothais
Bastok Mines:
Detzo, Gumbah, Vaghron, Valeri, Roh Latteh
Bastok Metalworks:
Folzen, Patricius, Remus
Southern San d'Oria:
Authare, Blendare, Foletta, Leuveret, Raminel
Northern San d'Oria:
Ailbeche, Kuu Mohzolhi, Maurinne, Taurette
San d'Oria Port
Artinien, Auvare, Brifalien, Miene
Windurst Port:
Diegai, Gomada-Vulmada, Kohlo-Lakolo, Mov Lingyoh, Odilia, Papo-Hopo, Paruru, Paytah, Pichichi, Pyo Nzon, Shanruru, Yafa Yaa
Windurst Waters:
Akkeke, Aora-Uora, Arukoko, Buchi Kohmrijah, Chomoro-Kyotoro, Clais, Diroku-Oroku, Foi-Mui, Hororo, Janta-Jonta, Kirarara, Koko Lihzeh, Kotan-Moritan, Majiji, Mashuu-Ajuu,Mimono, Myumimi, Pakesse-Myukesse, Paku-Nakku, Rabiri-Tabiri, Rukuku, Temoe-Amoe, Yohra-Ora, Yung Yaam
Windurst Walls:
Chomomo, Juna Moshal, Komomo, Migi Centa, Purakoko, Rutango-Botango, Toi Pio
Windurst Woods:
Etsa Rhuyuli, Iya Rihyo, Nhobi Zalkia, Patsaa Maehoc, Phuz Mannohl
Holiday Fame Levels
CAUTION: Warping to another city from the Moogle will cause your Holiday Fame to go down. The basic fame message stays the same, it's only the amount of joy that changes. Once you have maxed it in one city, it is maxed in the others. Also, it appears that your Holiday Fame either decreases with time or with completion of other parts of the Holiday Festival. After I got my Dream Hat +1, my Holiday Fame dropped to Level 2.
Moogle : (Ah! One of the strange hat-lady's/man's underli--)
Merry holidays, Ms./Mr. Adventurer! It looks like you (JOY MESSAGE BELOW) to the children of Vana'diel, kupo!
Moogle : Now, if you want, I could warp you to another nation so you could bother--I mean, bring joy to the wee ones there, kupo.
Level 1: "haven't brought any joy"
Level 2: "have been slacking off bringing joy"
Level 3: "have been bringing a tad bit of joy
Level 4: "have been bringing a fair amount of joy"
Level 5: "have been bringing barrelfuls of joy"
Level 6: "have been bringing ridiculous amounts of joy"
Level 7: "have been bringing caravans loaded with ludicrous quantities of joy"
Event Specifics
Official Announcement: Fellowship of the Red Hat
Event Schedule: December 16, 19:00(PST) - December 26, 19:00(PST)
Event Item Rewards: Dream Hat, Dream Hat +1, Bastokan Tree, San d'Orian Tree, Windurstian Tree, Brilliant Snows, Popstars, Sparkling Hands.
Other Event Rewards: Teleports between the three starting cities, from the Holiday Moogles; teleports to any outpost (regardless of who holds the region or the character's level) from the Outpost Teleporters in exchange for fireworks: 10 Brilliant Snow in Bastok, 10 Popstars in Windurst or 10 Sparkling Hands in San d'Oria.
Other Items Used in Event: Kiddie Present, Thankful Letter, Grateful Letter, Joyful Letter, Special Present, Rimed Sapling, Polar Fir Sapling, Polar Flowerpot, Knightsbell, Ice Bauble, Blue Bandeau, Khue Pie, Mehiruru Pop, Jade Bauble.
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(PS2)