A snowwoman caricature of Rosie O'Donnel, (voiced by herself), parodying the role of Sam the Snowman from Rudolph the Red-Nosed Reindeer, opens up the segment saying that "if I live to be a trillion and two, I will never forget the year Goddard the 200-Watt Dog saved Nickmas!" She then remarks that we all know "that" story, and what she's here to tell is the after-party that occurred immediately following that event. As Rosie's narration goes on, we see her observing that very party going on in Santa's workshop. She notes of everybody being there, including Yukon Chinelius, Winter Squidler, the Abominable Starfish, and of course, St. Nick himself (who laughs to the tune of the Nickelodeon channel jingle). We see Mr. Krabs and two identical crabs performing on stage, and everyone enjoying their music so much that Carl Wheezer goes break dancing.
Naturally, Rosie remarks, this party had some rather juicy things going on. First up was gossip - SpongeBob reveals to his fellow elf, Jorgen Von Strangle, that "I don't want to be an elf, I want to be... a fry cook." Surprised at this, Jorgen tells it to Jimmy Neutron, who then relays it to chief elf, who responds by screaming, "Who's SpongeBob?! TELL ME!!!" Then there was flirting - we see Yukon Chinelius bragging to Debbie Thornberry about his apparent battle with the Abominable Starfish, all the while Dil Pickles (as Happy) is bouncing on the Starfish's belly in front of them. And of course, adds Rosie, there were embarrassing photos - SpongeBob ripping his pants, Plankton trying to kiss Helga Pataki under the mistletoe, and Goddard taking a leak by the tree.
In the end, though, Rosie tells us all that the characters all remembered the spirit of Christmas - "to put aside [their] differences, join their hands together, AND OPEN PRESENTS!" As the characters all dive at their presents under the Christmas tree, Rosie comes in and leads the characters in wishing the viewers "Happy (insert holiday choice here) to you!"
Rosie O'Donnel - Sam the Snowman from Rudolph the Red-Nosed Reindeer
Goddard - Rudolph
The Crimson Chin - Yukon Cornelius from Rudolph the Red-Nosed Reindeer
Patrick Star - The Abominable Snow monster from Rudolph the Red-Nosed Reindeer
SpongeBob SquarePants - Hermey the Misfit Elf from Rudolph the Red-Nosed Reindeer
Squidward - Winter Warlock from Santa Claus is Comin' to Town
Dil Pickles - Happy from Rudolph's Shiny New Year
Zim - the Elf Foreman from Rudolph the Red-Nosed Reindeer
SpongeBob ripping his pants in one of the photos in is a direct reference to the "Ripped Pants."
When Rosie O (and the others) say "Happy (insert holiday choice here) to you!," they want the kids to choose a holiday. It could be a spoof of censorship cures.
The picture of SpongeBob's ripped pants might be another candidate for the embarrassing photo of the Christmas party that was in Patrick's secret box. (Another possible photo can be seen in the book Chuckle and Cringe: SpongeBob's Book of Embarrassing Stories.)
If the embarrassing picture of SpongeBob is the same one that Patrick kept in his secret box, this would imply that within the show's canon, SpongeBob knows all the other Nicktoons characters. However, it is revealed in the short that SpongeBob wants to be a Frycook, implying that this was before he got his job at the Krusty Krab, which doesn't follow the series continuity because SpongeBob found out about Christmas while he was already employed.
Because of these inconsistencies it is possible that this short isn't canon, but contains several references to the series.