styrofoam = igloo blocks annnnnd the rough brick that Bethlehem was build out of. Some blue/silver spray paint makes great looking ice peices and some brown or clay colored can make the brickes used to build up a marketplace. Have each of your actors bring in some type of small prop for a market place, and go to a local grocerie store and pick up their leftover boxes (or any big applience place) for cardboard to make the stalls and backdrops for the market. use the bricks to build up the seller's carts and stalls and have your actors bring in props to fill them fake fruits and veggies, anything that they can find in their attic that *might* fit the time period that they dont need! 

As for lighting, try white holiday lights.  Surprisingly, they give off lots of light and you can usually find them at yard sales this time of the year.

we staged a play recently although a christmas play.we painted the flats white and used christmas trees ribbons and ballons.as for the light,i think red shud do it.