There are many opportunities to share in the beauty of different faith traditions that may exist within one family. There is no reason why sharing your in-laws traditions would end up being confusing to your daughter. It is, in fact, an opportunity to teach her the Jewish ideal about the love of family and how wonderful healthy relationships with family can be when honored from both sides. Writes Rabbi Don Rossoff, "Just as Christians can share in a Passover seder with the Jewish side of the family without it being their holiday, Jews can share in Christmas with the Christian side of the family without it being their holiday."
Another analogy which is often used in this scenario is to talk about it the way we explain someone else’s birthday. Just because it isn’t your birthday, there is no reason not to celebrate someone else’s special day with them - and we hope there will be chances for them to share and celebrate with us, either for a birthday, or perhaps for a Jewish holiday allowing you to teach them as well.