Well, now that I am back working in schools, I am reminded of the fact that all children everywhere will probably be making some kind of dragon, possibly an envelope for money and some sort of craft around whatever animal it is this year. Just like Diwali, when most nursery and reception school kids will make a clay diva, year in year out. Having said that, at least schools are acknowledging festivals from other faiths - not like when I was a child.
What I rarely see (or hear) is traditional music being played. I have a 'tape' of Chinese music, still possibly tokenistic I know, but a bit different. The children do notice that we are listening to music that we don't normally listen to and respond favourably. We get ribbons and scarves out and have a dance. Now I will have to download something as I don't have anything on which to play my tapes! You could show some dragon dances on youtube if yours would be interested. I have also picked up several items over the years from visits to China town. I make an interest table with them and all the children - toddlers through to year 3s have been fascinated with them. I have some tea leaves in a beautifully decorated tin, some silk slippers and a little silk purse, wooden fans which they love to open and use on themselves and each other etc so it's quite sensory too. We have Chinese style utensils in our home corner and I always use cook 'something Chinese' with the children where possible.
All children love the story of the race. Some toddlers will be interested to see China on a map or globe - others won't be interested at all.
If you have a China town/community near you it would make a great trip out - a real feast for all the senses! Afterwards you could turn your role play area into a Chinese restaurant. One year this was so popular in my reception class that we kept it going for far longer than we anticipated and most of our Maths and Literacy learning took place in the 'restaurant' for weeks. Maybe coincidental but I had moved the role play 'corner' into the centre of the room and it was the focal point of the classroom and the first thing you saw when you entered the room. We also had to keep expanding it in size - just incorporating all the other tables into it.
Basically, don't think about having an end product, think about experiencing the festival as a child celebrating it would experience it.