How to Make Fondant from Marshmallows
To make fondant from marshmallows, start by covering your hands and spoon with shortening to prevent the marshmallows from sticking. Then, microwave your marshmallows at 30-second intervals until they're fully melted. Stir in half a bag of sugar, then add the flavoring and food coloring. When everything is combined, tip the mixture onto your work surface and knead the dough. Form the dough into a ball and coat it with vegetable shortening before wrapping it in plastic wrap and placing it in the fridge overnight.
Use shortening to oil a wooden spoon and your workspace. Marshmallows are extremely sticky, and you'll have a difficult time handling them if you don't use a lot of shortening throughout the fondant-making process. The shortening prevents the marshmallows from sticking to the countertops and the spoon you're using. Rub shortening all over the spoon, not just the bottom. Cover the handle as well. Rub shortening on a large cutting board, baking sheet, or whatever work surface you're planning to use when it's time to knead and roll out the fondant dough. This is a messy job, so you'll need a big surface. Place the marshmallows in a big microwavable bowl. Use the largest one you have that fits in the microwave. Dump all of the marshmallows into the bowl, then pour the 2 tablespoons of water on top. Microwave the marshmallows in 30-second increments. You want to completely melt the marshmallows, but do it slowly so they won't make a mess. Check the marshmallows every 30 seconds to monitor their state, and remove the bowl from the microwave when they're melted. Stir in the powdered sugar. Pour half the bag of powdered sugar into the marshmallow mixture, and use the spoon to mix it in. Pour in more powdered sugar and keep stirring. The mixture will become very stiff, and eventually difficult to stir with the spoon. That's when you'll want to stop adding powdered sugar. You may not need the entire bag. Stir in the flavoring and food coloring. Now's the time to add the extract and food coloring you wish to use. If you don't want the whole batch of fondant to be the same color, separate the dough into pieces before adding different food coloring to each. Knead the fondant dough. Tip it out onto your work surface. Lather your hands up with plenty of shortening. Start kneading the fondant dough as you would knead bread. Keep kneading until the dough is pliable and has the consistency of real fondant; you should be able to stretch it without it tearing. You'll need to knead for 8 to 10 minutes to achieve this. The dough may be very hot at first, so be careful when you first start kneading. Wait a minute or two if necessary so you won't burn yourself. Keep the shortening nearby so you can dip your fingers in as you go; you'll need a lot throughout the process. If the dough seems very dry, knead in another tablespoon of water to make it more elastic. Rest the fondant. Form the fondant into a ball. Coat it with a thin layer of vegetable shortening. Cover it with plastic wrap so it won't dry out. Place it in the refrigerator and let it rest overnight. Roll the fondant just before you're ready to use it. Unwrap the ball from the plastic wrap and place it on a greased work surface. Use a greased rolling pin to roll it out in to a flat, thin disc that exceeds the size of the cake you want to use it to dress. You can use cornstarch instead of shortening on your work surface to make sure the fondant doesn't stick. Rolling it to a thickness of 1/16 an inch is a good bet for most cake recipes. Lay the fondant over the cake. Lift it using the rolling pin, then carefully transfer it to the cake so that the center of the fondant disc rests in the middle of the cake. Drape the edges of the disc over the sides of the cake. Gently press it around the cake so it stays in place with no bumps or wrinkles. Don't stretch the fondant at this stage, or the cake will end up with wrinkles. If the fondant rips while it's being transferred, you can smooth it out by gently pressing the ripped edges together. Trim the fondant. Use a knife to trim the fondant from around the base of the cake. Lift the trimmings away. Finished.  
Use shortening to oil a wooden spoon and your workspace. Place the marshmallows in a big microwavable bowl. Microwave the marshmallows in 30-second increments. Stir in the powdered sugar. Stir in the flavoring and food coloring. Knead the fondant dough. Rest the fondant. Roll the fondant just before you're ready to use it. Lay the fondant over the cake. Trim the fondant. Finished. 