On November 7th, 2005, Cindy Donovinh announced the appearance of a vaguely menacing Santa Claus by the town fountain in Barton Town. He began inciting the people of Barton against Jack, claiming that Halloween 2005 was a disaster, and that Jack had mucked things up for everyone. During all of this, Jack came up behind Santa and challenged him to insult him to his face. Santa retorted, daring Jack to hit him. Jack did, and with a very strong punch he knocked Santa clear across town, smashing him into the Linklist, which was destroyed. It was then revealed that Santa was in fact operating a mech-suit which was supposed to protect him, the parts of which were scattered across the wreckage of the Linklist.
As Santa lay mortally wounded from the punch, he flashed back to when he had first met Jack, on a road in the middle of nowhere. Various holiday figures, including The Easter Bunny, had surrounded Santa and were hitting and kicking him with a vengeance. Jack interceded, performing his signature punch and sending the Easter Bunny flying. This deformed his face, presumably leading to the cybernetic bunny we see today.
Jack and Santa then chatted and became friends. At this point, the flashback ends, and we are shown Santa lying on a hospital bed. Comments from doctors are shown, with Santa's apparent death ending the update.
(Part 2 needed)