NIles and Frasier battle to make Martin's Christmas the best that's possible, but it's mainly a competition between the brothers.
Lots of things are on auto-pilot in this episode, the endless one-upmanship between Frasier and NIles, the misunderstandings when trying to tansport the real gifts to Martin's part-time security job and the obligatory thrown-in holiday jokes (including the real meaning of "wassail"). By this time in the series, there's just not a lot new going on and its pretty dang flat.
Perhaps the strangest scene is between Roz and Daphne at the coffee shop when the "Santa" that Roz is working with (and has a crush on) shows up. Jane Leeves is quite odd in her performance, squeezing out weird facial expressions and leaving most of her serious concentration somewhere besides the set - its pretty bad in its execution.
At the very least, since the main plot is fairly worn in this episode, it could use a better secondary story.