OK, so I cheated and bought the pre-made and assembled houses, but we do this every year and the kids always have a blast decorating them. I buy every conceivable Christmas candy, make a batch of Royal Icing (I add a bit of peppermint extract to make the inevitable finger-licking more fun) and just let the kids have at it!
Boy had a friend over, so we let Friend make one, too, and he turned out to be SUPER creative, making icicles to hang from the eaves and using the paper from a Hershey Kiss to form smoke curling out of the chimney - WOW!
Cute kids. Good site. :-)