Ideas needed for late December family trip

We visited Norway in August/September; so I have no real experience to share. However, we enjoyed Lillehammer and I’m certain there would be some winter sports experiences there, (bobsled, ski jumping, Nordic skiing, etc). The Jotenheimen area was really stunning, (like, but not like the fjords of NiN). I don’t know how accessible in the deep winter.

We loved Norway. Safe travels.

I would say if you are there actually at Christmas or New Year, double check your reservations. A lot of hotels close. I've arrived off the Hurtigruten into Bergen on New Years Eve with a confirmed reservation only to find the hotel shut. I then had real problems finding one open with an available room, and had to pay well over the odds.
However Bergen does a pretty good NYE fireworks display. There is also the gingerbread city to see in Bergen throughout the Christmas season.
I've been to Christmas Eve service in the Domkirke in both Bergen and Tromso, and both were very special experiences/liturgies, even if my Norwegian is fragmentary, to be kind.
Norway pretty much closes down at noon on Christmas Eve (including public transport), the afternoon and evening are family time, exemplified in the Church services.
I actually recommend a Hurtigruten/Havila cruise at least as far as Tromso. Yes you may see the Northern lights but you get to experience the majesty of the strange winter half light, where the sun never rises properly.
Any Hurtigruten cruise sailing on Christmas or NY eve skips ports to have an extended stay in some port or other.
On board it is also a great way to experience Norwegian food and traditions of the season. In all sorts of ways a totally different experience to a summer cruise.

I understand the weather and limited daylight this time of year, but
since we live in Minnesota, we are use to both.

Are you sure? Norway is much further north. For a bit of perspective, Minneapolis is roughly the same latitude as Bordeaux. Southern coastal Norway generally has a mild climate, but further inland it can get much colder and snowier. And it will be darker than Minnesota, expect around 5 hours of daylight in late december.

I am trying at least get a rough itinerary of towns and regions to
visit. After hours and hours of research and combing through posts
here, I thought I would throw it out the Rick Steves group and hope to
get some advice and tips.

It depends on what you're looking for and what you want to see and to. It might be a good idea to stick to the major cities since there is a bigger chance of things being open over the holidays.

Although our family skis, we are not planning to tackle this during
the trip. Hiking and snowshoeing may be worth trying.

Skiiing can be done more or less everywhere, but the opportunities for hiking will be very limited.

We are not set on seeing Northern Lights (and want to avoid purchasing
any additional flights to travel to the far north).

But keep your eyes open, even in the south you have decent chance of seeing them. Although you should not count on it.

We are interested in doing the Norway in a nutshell, although some of
the dates are blocked or have limited hotel options, so a little
unsure on options. I have an email into them for more info.

Expect fewer options during the holidays, and keep in mind limited daylight if you're planning the trip.

At least for a couple days, we couldrent a car and explore some of the
off the beaten path towns. Obviously we want to avoid roads that are
too treacherous, but we are use to driving in snow and ice (and would
rent a 4 wheel drive vehicle).

You don't need four wheel drive to drive in Norway in the winter. Most cars are two wheel drive. But what kind of off the beaten path towns are you looking for?

Definitely want to see and explore the Fjords. Also, would be great to
stay in some more rustic sites with great views.

How do you define rustic sites?

I see Badger has already pointed out the major geographical difference between Minnesota and Norway. I checked Wikipedia and found Oslo averages less than 35 hours of sunlight for the entire month of December. For Minneapolis/St. Paul the figure is 114.3.