Of course the first thing I do is try to find the right song.  I do an informal poll and ask a lot of people what is their favorite Christmas song.  After that I listen to as many versions of the song I can.  I used to use Musicmatch but now I use Rhapsody to listen to a song on demand.  Once I find the right one I buy the song.  I may end up editing the song for length.  I'll use Audacity for the editor.

After the song is picked out I 'Map' out the song.  This usually means I listen to the song and just write out the time in minutes and second of all the phrases in the song.  For example:
1.05 Jesus oh what a wonderful child
1.10 Wonderful
1.12Counseler
...
Then I put in brackets what I think might look good there.

1.05 Jesus oh what a wonderful child [bring up manger scene]
1.10 Wonderful  [light baby Jesus up]
1.12Counseler ...

Next step is to start writing the sequence for it in a software package called LightORama