Looks like you've already had lots of advice. Not sure mine will be any more helpful but here goes anyway...
My grandson is a sweetheart. At 9 he's sensitive and caring but when he was younger he didn't like hugging or, really, a lot of physical contact. It was frustrating for the adults who loved him but we respected his sensibilities. And now that he's older when he hugs it's a genuine thing that's as nice for him as it is for us.
Basic good manners, OTOH, were something we expected right from the beginning. When he and I went on errands to, say Costco or Trader Joe's where samples are offered, he had to wait for a turn, make eye contact -- something that was also uncomfortable for him -- ask "may I have some?" in a loud clear voice and then say "thank you" so he was heard. Some of the busy sample folks didn't have the time to interact with him. Most of them kvelled and said something like "you have better manners than most adults". And I would tell him how much people appreciated good manner and how well disposed they would feel toward him and how much more pleasant it would make his life to be around people who enjoyed his company. Heavy and abstract concepts for a kid who could barely see over the sample tray but the message got through and now he's more confident and easy in his dealings with people who aren't familiar to him. Most importantly, he's kind.
Seems like it's your nephew's parents you need to have the discussion with. They're the ones who need to understand that his life will be more difficult, colder. He'll be more unhappy and his life will be less rewarding if he's someone who engenders resentment or aversion that could easily be avoided by some manners and consideration for others. Loving and being loved will come harder to him if he doesn't master empathy for others. This is important stuff for them to think about and begin to deal with. And you're right to be concerned about it.
As for Christmas, I wouldn't single him out to not get a present -- especially if gifts are exchanged at a family event. I wouldn't make a present an opportunity for snark like coal but as someone before me said, maybe socks and underwear is the way to go. But it's also a fair point that gifts are an expression of the relationships and affections we share not payments due. Mostly, do what's in your heart. Be genuine about whatever it is you do.
And have a lovely warm holiday with the people you love and who love you!
Many times kids act out because they are looking for validation. I wouldn't stoop to his level by treating him any differently, it will send the wrong message.
