I don’t have kids, but I have had and have overheard some conversations with my nephews and niece about God and religion. In the case of my eldest nephew, he was raised going to church regularly, and he had the sort of opposite problem that the OP had, where when it came up that people believed something other than what he’d been raised believing, he was baffled that people DIDN’T believe in God, or had different ideas or opinions about the nature of God.
Children, especially at young ages, I think have difficulty understanding that people might think differently than they do (theory of mind and all that), and moreso, I think it takes an even older age before kids are able to understand that some topics don’t necessarily have a right answer, like religion and politics and all of that.
Speaking for myself, though, despite that I was raised Anglican, I never saw God as a Super-Santa, though I do gather that a lot of kids do. Hell, even Santa wasn’t really Santa, but Santa was spoiled for me when I was four or five and I found the gifts by accident, so I don’t even have much of a recollection of believing in Santa.
So, really, I think one of the best things to do is to not send inconsistent messages, and I think it’s exactly something like Santa that does. If you’re religious and raise your kids believing in Santa, when they finally come to realize he doesn’t exist, that could very well undermine their religious upbringing. And on the opposite side, if you aren’t, why would they believe you when you say religion is just myth, but then you fed them stuff like Santa and the Easter Bunny as though they should believe it.
Ultimately, I think the best way to approach it is to avoid cynicism in either direction, and rather than trying to imprint what I may or may not believe about the topic, instead, trying to figure out the motivation behind the question. For example, I remember my nephew asking about someone that looked different, if I recall correctly he was a Sikh, and so naturally arose the question about what that is and all. He wasn’t interested in learning about my opinion on that religious belief, he just wanted to understand why he looked different.
So, I’d say the answer to “What is God?” or “What is church?” or whatever should really depend on the context of the question. Admittedly, I’ve only had to deal with these sorts of questions a few times, since I’m just an uncle and not a parent, but I have felt like when getting on more heady subjects like that, a little bit of effort into figuring out what they’re really asking helped a lot.