Every year around Christmas, we get together with the cousins and act out the Nativity. The children dress up very simply. We use towels, adult dress shirts, robes, ties, and scarves. We also use props like angel wings, stars, and crowns.
The children each get a piece of a nativity set and dress up as that character. We then read the Christmas story from Luke. As the child's part is read, the child comes into the room and places his or her piece in the stable and stands in place.
This is a very effective way to teach children the story of the nativity! You can apply the dressing up to any scripture story you want to focus on.