Translation difficulties

[Dainanzen]

Greetings, everyone. To improve my Japanese skills while not getting seriously bored, I thought it'd be interesting to read a light novel (すずみやはるひのゆううつ）. Probably a bad idea, because for now I'm doing more 'decodifying' than reading proper, but at least I'm getting some vocabulary out of it.
Anyway, the second sentence in the book is already more than I can handle. I got the general meaning, but I'm still uncertain about a few things.

The narrator is talking about not believing in Santa anymore:

幼稚園のクリスマスイベントに現れたサンタは偽サンタだといかいしていたし、記憶をたどると周囲にいた園児たちもあれが本物だとは思っていないような目つきでサンタのコスプレをした園長先生を眺めていたように思う。

What I got from it is:
I understood that the Santa who showed up at Christmas on kindergarten was a fake Santa, besides, as far as memory goes, [other] kindergarten students didn't think that was something true either, [judging] by their looks when the principal teacher dressed as Santa.

Is this more or less correct?
Besides that, two questions:
1- What are the とparticles (I put them in bold type) doing? AFAIK, と can mean "and" or indicate a quote. I don't see them doing any of those functions here.
2- I'm surprised by the verb-te + ita structure. I know -te + iru is more or less the equivalent of English -ing, but I think in this case, for instance, omotteinai is better translated as "didn't think" than "weren't thinking". Did I get it wrong, or do the Japanese just say it differently?

Any help will be welcome, and thank you in advance!

[NocturnalOcean]

と has many many uses in Japanese.

I am not sure if don't understand the sentence, or if you have misspelled something, but are you sure it isn't だと理解していた(rikai)? If so, to is often used as marker. Same as the last と---- と思う. That is something you should have seen before.

Then second と means when in this context..
When I retrace my memory.......

[Dainanzen]

ごめんあさい、NocturnalOcean　さん。　理解　です。。。 I actually misread the transcription I made to my notebook when typing it.
Ok, so と n.1 is a marker, n.2 means "in this context" and n.3 is a marker too? I do know about と思う, but with that は before the verb I thought the と was, well, something completely different.

Thank you for your help - it does make more sense now...

[Hyperworm]

no.2 means "when"
(NocturnalOcean: skimping on the quotation marks )

本物 is "the real thing" ("didn't think he was the real thing either")

I'd say something like
"I understood that the Santa who showed up at Christmas in kindergarten was a fake Santa, and retracing my memory, it seems to me that the kindergarteners around me, too, were gazing at the Santa-suit-wearing principal with distinctly unconvinced looks in their eyes.(/looks like they didn't think he was the real thing)"

The structure of the second clause after 「し、」 is 記憶をたどると・・・ように思う, so I'd interpret that as meaning that he's only now (now that he's retracing his memory) coming to this perception of the scene; he might not have realized at the time. Hopefully someone can correct me if I'm wrong on that ^^;

Also, careful how you type ん and vowels following it in the IME
→ごめんなさい

[Dainanzen]

The structure of the second clause after 「し、」 is 記憶をたどると・・・ように思う, so I'd interpret that as meaning that he's only now (now that he's retracing his memory) coming to this perception of the scene; he might not have realized at the time. Hopefully someone can correct me if I'm wrong on that ^^;

You are interpreting it this way because 記憶をたどると means "when I retrace my memory", then? At least it makes sense.

It's quite embarrassing, but now that I read your version, I realize I translated this whole "memory" section wrong because, for whatever reason, I thought 周囲に was connected to "retracing memory" - thus meaning something like "retracing my memory to its limits" - instead of referring to the classmates...

And don't you worry, from now on I'll type ごめんなさい as it should be. Thank you for your very helpful post!