It was a second successive five-goal return for Carl Adams's in-form side, with their seventh league win on the bounce also maintaining a 10-point advantage at the top of the United Counties League Premier Division South.
This latest victory means Valley go into 2023 handily placed to finally escape from Step 5 of the non-League pyramid six years on from being relegated into it, with Adams stressing the importance of taking advantage of the excellent start that has been made.
He said: "With the quality we now have in the squad and the position we have got ourselves into in the table, we really should go on and achieve our target this season from here.
"Against Lutterworth, it was another example of not necessarily being at our best, but once more we were very clinical and scored five well-taken goals."
Rugby were quickly out of the traps again, with Jordan Wilson breaking the deadlock against his old club with a second-minute strike to finish off Caine Elliott's cleverly lofted assist.
The visitors pulled themselves back on level terms when Town keeper Matt Hill totally misread Karabo Motshweni's corner to allow it to drift directly in, but Edwin Ahenkorah's spectacular 30-yarder restored the lead almost immediately.
Wilson's second just after the break stretched the hosts' lead further, before Hanibal Sallami reduced it again with a well-struck effort off the underside of the bar.
Dan Summerfield headed in Ryan Seal's cross for Rugby's fourth to settle any nerves, with Seal rounding things off in added-time with a close-range finish.
Elsewhere in the UCL on Boxing Day, Town's closest rivals Sphinx edged home 3-2 in the Coventry derby against United, whilst third-placed Newport Pagnell Town could only draw which increased the gap between them and Rugby to 15 points.
Valley have the chance to increase the differentials over their two main challengers when they travel to Cogenhoe United on Bank Holiday Monday (January 2) for a 1pm kick-off.