I think we've got to be careful to distinguish the two types of actions that are occurring. The first type involves a state actor (the local capitol building, state hall, etc.) and the associated Christmas display. Lawsuits may be brought in those instances because there is a possible Establishment Clause issue.

The K-mart, etc. are private entities and any action that is to be taken against those type actors can only be taken in the form of a boycott or a petition, etc. Any liberal groups that disagree with "Merry Christmas" have a right to express their disapproval, etc. to the company and try to use negative economic effects to force the company into expressing their views. Conservative groups do this all the time when they boycott a Harry Potter movie or a Marilyn Manson concert.

P.S. I also don't care if a store says Happy Holidays or Merry Christmas, but that's probably because neither way offends me. If they use Christmas, I'm not offended b/c I'm a Christian, and if they say holidays I am equally not offended because I don't see it as an assault on Christmas.