Why does the Santa Suit have an O ?

That's a good question. I don't know if it's ever been explained?

It has always reminded me of a Christmas reef.

It's a wreath with hearts on it. There are Christmas designs all over the suit. For example: Holly leaves and wreaths are above the fur trim on the bottom of the coat.

That's not an "O," that was a wreath that was etched into the velvet. I've seen velvet like that, where a special technique is done to lightly burn a design into the fabric, and it leaves behind an interesting design, though fabric like that is extremely expensive, especially if it's a custom job. Of course, since he's Santa, he doesn't have to pay for that ;).